At the end of the year, a company offered to buy 4,660 units of a product from X

Question

At the end of the year, a company offered to buy 4,660 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $17.00 each. The following information relates to the 67,400 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 $8.15 2.70 Total $549,310 181,980 $731,290 Fixed cost of goods sold for the year were $122,668, and fixed period costs were $98,404. Variable period costs include selling commissions equal to 3% of revenue. S. Profit on the special order is $15,984 ou are correct. Your receipt no. is 152-1086 6. Assume the following two changes for the special order: 1) variable cost of goods sold will increase by $0.73 per unit, and 2) there will be no selling commissions. What wll be the effect of these two changes on the special order profit? 1863.8 Submit Answer Incorrect. Tries 1/3 Previous Tries

Explanation / Answer

Variable unit cost for cost of goods sold = (549310-122668)/67400= 6.33 Variable unit cost for period costs = (181980-98404)/67400= 1.24 Sales commissions =17*3% = 0.51 6 Incremental revenue 51260 =4660*11 Variable costs 36301.4 =4660*(6.33+0.73+1.24-0.51) Profit on sepcial order 14958.6 Profit on special order will decrease by $1025 or $1025.4 (15984-14958.6) Since it is a decrease put minus sign before answer

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