At the end of the year, a company offered to buy 4,960 units of
a product from X Company for $11.00 each instead of the company's
regular price of $17.00 each. The following income statement is for
the 66,300 units of the product that X Company has already made and
sold to its regular customers:
| Sales |
$1,127,100 |
| Cost of goods sold |
556,920 |
| Gross margin |
$570,180 |
| Selling and administrative costs |
160,446 |
| Profit |
$409,734 |
For the year, variable cost of goods sold were $416,364, and
variable selling and administrative costs were $88,179. The special
order product has some unique features that will require additional
material costs of $0.78 per unit and the rental of special
equipment for $3,000.
4. Profit on the special order would be
| A: $9,946 |
B: $11,636 |
C: $13,615 |
D: $15,929 |
E: $18,637 |
F: $21,805 |
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: $6,433 |
B: $7,269 |
C: $8,214 |
D: $9,282 |
E: $10,489 |
F: $11,852 |