Question

# At the end of the year, a company offered to buy 4,100 units of a product...

At the end of the year, a company offered to buy 4,100 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 60,300 units of the product that X Company has already made and sold to its regular customers:

 Sales \$1,145,700 Cost of goods sold 511,344 Gross margin \$634,356 Selling and administrative costs 157,986 Profit \$476,370

For the year, fixed cost of goods sold were \$119,394, and fixed selling and administrative costs were \$88,038. The special order product has some unique features that will require additional material costs of \$0.73 per unit and the rental of special equipment for \$3,000.

1. Profit on the special order would be:

2. 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:

#### Homework Answers

Answer #1
 1 Variable cost of goods sold 6.50 =(511344-119394)/60300 Variable selling and admin costs 1.16 =(157986-88038)/60300 Revenue 49200 =4100*12 Less: Costs Variable cost of goods sold 26650 =4100*6.50 Variable selling and admin costs 4756 =4100*1.16 Additional material costs 2993 =4100*0.73 Special Equipment 3000 Total costs 37399 Profit on special order 11801
 2 Effect on reducing selling price 7839 =60300*0.13
Know the answer?
Your Answer:

#### Post as a guest

Your Name:

What's your source?

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Not the answer you're looking for?
Ask your own homework help question
ADVERTISEMENT
##### Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

ADVERTISEMENT