Question

# X Company produces 65,600 units of its regular product each year and sells each one for...

X Company produces 65,600 units of its regular product each year and sells each one for \$13.00. The following cost information is available: Total Per-Unit Direct materials \$130,544 \$1.99 Direct labor 102,336 1.56 Variable overhead 205,984 3.14 Fixed overhead 132,512 2.02 Variable selling 87,904 1.34 Fixed selling 82,000 1.25 Total \$741,280 \$11.30 A company has offered to buy 4,090 units for \$13.45 each. Because the special order product is slightly different than the regular product, direct material costs will increase to \$2.09 per unit, and some special equipment will have to be rented for a total of \$17,000. 1. What would profit on the special order be? A: \$-9,883 B: \$-8,072 C: \$-6,806 D: \$-5,529 E: \$-3,240 F: \$4,759 Tries 0/99 2. Assume that if X Company accepts the special order, regular sales would fall by 1,050 units. The effect of this fall in regular sales would be to decrease company profit by ?

 Per-Unit Direct materials \$2.09 Direct labor [all variable] 1.56 Variable overhead 3.14 Variable selling 1.34 Total manufacturing cost \$8.13

Profit= Total sales - total variable cost- fixed expenses

=\$13.45*4,090- \$8.13*4,090 -\$17,000

=\$55,010.50- \$33,251.70-\$17,000

=\$4,759

Hence the correct option is F-\$4,759

b-

 Per-Unit Direct materials \$1.99 Direct labor [all variable] 1.56 Variable overhead 3.14 Variable selling 1.34 Total variable cost 8.03

Contribution= selling price- variable cost

= \$13-\$8.03

=\$4.97

Profit= \$4.97* 65,600 units -132,512-82,000

=\$111,520

If sales reduce

=\$4.97*64,550-132,512-82,000

=\$106,302

Company's profit will decrease by\$111,520- \$106,302= \$5,218

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