Question

At the end of the year, a company offered to buy 4,900 units of a product from X Company for $11.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 63,500 units of the product that X Company has already made and sold to its regular customers:

Sales		$1,206,500
Cost of goods sold		475,615
Gross margin		$730,885
Selling and administrative costs		168,275
Profit		$562,610

For the year, fixed cost of goods sold were $124,460, and fixed selling and administrative costs were $83,185. The special order product has some unique features that will require additional material costs of $0.84 per unit and the rental of special equipment for $5,000.

4. Profit on the special order would be _______

Answer 1

Calculation of profit on special order
Sales	53,900	(4900*11)
Less:
cost of goods sold	27,097	((475615-124460)/63500))*4900
Additional material cost	4,116	(4900*.84)
selling and Admin Expense	6,566	((168275-83185)/63500)*4900
Rental of special equipment	5,000
Profit	11,121