At the end of the year, a company offered to buy 4,180 units of a product from X

Question

At the end of the year, a company offered to buy 4,180 units of a product from X Company for a special price of $12.00 each instead of the company's regular price of $18.00 each. The following information relates to the 69,600 units of the product that X Company has already made and sold to its regular customers:

The special order product has some unique features that will require additional material costs of $0.75 per unit and the rental of special equipment for $3,500.

5. Profit on the special order would be_______

Total   Per-Unit Revenue $1,252,800 $18.00    Cost of Goods Sold    Variable 435,696 6.26       Fixed 144,072 2.07    Selling and Administrative Costs    Variable   80,736   1.16       Fixed     100,920   1.45    Profit $491,376 $7.06   

Explanation / Answer

Per unit cost for regular order = 6.26 + 2.07 + 1.16 + 1.45 = $10.94

Per unit additional cost = $0.75

Per unit cost for special order = 10.94+0.75 = $11.69

Total Cost for special order of 4180 = 4180*11.69 + 3500(rental cost of special equipment) = $52364.2

Revenue generated from special order = 4180 * 12 = $50160

Profit on special order = -$2204.2 or Loss of $2204.2

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