At the end of the year, a company offered to buy 4,310 units of a product from X

Question

At the end of the year, a company offered to buy 4,310 units of a product from X Company for a special price of $12.00 each instead of the company's regular price of $19.00 each. The following information relates to the 69,200 units of the product that X Company made and sold to its regular customers during the year: Cost of goods sold Period costs Total Per-Unit $8.69 2.74 Total $601,348 189,608 $11.43 $790,956 Fixed cost of goods sold for the year were $146,704, and fixed period costs were $99,648. Variable period costs include selling commissions equal to 4% of revenue 5. Profit on the special order is $17,800 You are correct. Your receipt no. is 152-7896 Previous Tries 6. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.83 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit? Submit Answer Incorrect. Tries 3/5 Previous Tries

Explanation / Answer

Variable unit cost for cost of goods sold = (601348-146704)/69200= 6.57 Variable unit cost for period costs = (189608-99648)/69200= 1.3 Sales commissions = 19*4% = 0.76 6 Incremental revenue 51720 =4310*12 Variable costs 27067 =4310*(6.57-0.83+1.3-0.76) Profit on sepcial order 24653 Profit on special order will increase by $6853 or $6853.20(24653-17800)

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