Question

Questions 4 and 5 refer to the following problem: At the end of the year, a company offered to buy 4,680 units of a product from X Company for $12.00 each instead of the company's regular price of $18.00 each. The following income statement is for the 60,200 units of the product that X Company has already made and sold to its regular customers: Sales $1,083,600 Cost of goods sold 505,078 Gross margin $578,522 Selling and administrative costs 152,908 Profit $425,614 For the year, variable cost of goods sold were $369,026, and variable selling and administrative costs were $77,658. The special order product has some unique features that will require additional material costs of $0.79 per unit and the rental of special equipment for $4,500. 4. Profit on the special order would be A: $6,777 B: $8,472 C: $10,590 D: $13,237 E: $16,546 F: $20,683 Tries 0/99 5. 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 $0.14. The effect of reducing the selling price will be to decrease firm profits by A: $8,428 B: $9,861 C: $11,537 D: $13,498 E: $15,793 F: $18,478

Answer 1

	Variable cost per unit
	variable cost of goods sold			369026/60200=			6.13
	variable selling and adm			77658/60200=			1.29
	on special order only variable cost and special cost will be incurred
	sales				12
	less variable cost
	cost of goods sold			6.13
	variable selling			1.29
	addittional material cost			0.79	8.21
	contribution				3.79
	total contribution		(3.79*4680)=		17737.2
	rent of sepcial equipment				-4500
	profit on special oder				13237
	answer	option d
		13,237
	part 2
	Contribution lost on regular customers
	(60200*.14)				8428
	answer)	option a
		8428