Question

At the end of the year, a company offered to buy 4,900 units of a product...

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 _______

Homework Answers

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
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