Question

At the end of the year, a company offered to buy 4,780 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 66,900 units of the product that X Company has already made and sold to its regular customers:

Sales		$1,271,100
Cost of goods sold		508,440
Gross margin		$762,660
Selling and administrative costs		196,017
Profit		$566,643

For the year, fixed cost of goods sold were $123,765, and fixed selling and administrative costs were $100,350. The special order product has some unique features that will require additional material costs of $0.82 per unit and the rental of special equipment for $3,500.

4. Profit on the special order would be

A: $15,620

B: $17,651

C: $19,945

D: $22,538

E: $25,468

F: $28,779

Tries 0/99

5. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost unless the selling price for them is reduced by $0.13. The effect of reducing the selling price will be to decrease firm profits by

A: $5,566

B: $6,958

C: $8,697

D: $10,871

E: $13,589

F: $16,986

Answer 1

Answer is given below with working