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 ?

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Answer #1

Answer-

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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