Question

At the end of the year, a company offered to buy 4,280 units of a product...

At the end of the year, a company offered to buy 4,280 units of a product from X Company for $11.00 each instead of the company's regular price of $18.00 each. The following income statement is for the 61,300 units of the product that X Company has already made and sold to its regular customers: Sales $1,103,400 Cost of goods sold 446,264 Gross margin $657,136 Selling and administrative costs 170,414 Profit $486,722 For the year, fixed cost of goods sold were $114,631, and fixed selling and administrative costs were $79,077. The special order product has some unique features that will require additional material costs of $0.87 per unit and the rental of special equipment for $3,500. 4. Profit on the special order would be A: $1,611 B: $2,336 C: $3,387 D: $4,911 E: $7,120 F: $10,324

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 $0.12. The effect of reducing the selling price will be to decrease firm profits by A: $4,159 B: $5,531 C: $7,356 D: $9,783 E: $13,012 F: $17,306

Homework Answers

Answer #1

Solution 4 :

Variable cost of goods sold per unit = ($446,264 - $114,631) / 61300 = $5.41 per unit

Variable selling and administrative expenses per unit = ($170,414 - $79,077) / 61300 = $1.49 per unit

Profit on special order = Revenue from special order - Variable cost - Additional fixed costs

= 4280*$11 - 4280*($5.41 + $1.49 + $0.87) - $3,500 = $47,080 - $33,256 - $3,500 = $10,324

Hence option F is correct.

Solution 5:

Effect of reducing the selling price on regular orders on company profit = 61300*$0.12 = $7,356 decrease

Hence option C is correct.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
At the end of the year, a company offered to buy 4,110 units of a product...
At the end of the year, a company offered to buy 4,110 units of a product from X Company for $11.00 each instead of the company's regular price of $18.00 each. The following income statement is for the 61,200 units of the product that X Company has already made and sold to its regular customers: Sales $1,101,600    Cost of goods sold    548,964    Gross margin $552,636    Selling and administrative costs      159,732    Profit $392,904    For the year, fixed cost of goods sold...
At the end of the year, a company offered to buy 4,000 units of a product...
At the end of the year, a company offered to buy 4,000 units of a product from X Company for $11.00 each instead of the company's regular price of $18.00 each. The following income statement is for the 60,600 units of the product that X Company has already made and sold to its regular customers: Sales $1,090,800 Cost of goods sold 555,096 Gross margin $535,704 Selling and administrative costs 140,592 Profit $395,112 For the year, variable cost of goods sold...
At the end of the year, a company offered to buy 4,570 units of a product...
At the end of the year, a company offered to buy 4,570 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 68,900 units of the product that X Company has already made and sold to its regular customers: Sales $1,309,100    Cost of goods sold    538,798    Gross margin $770,302    Selling and administrative costs      174,317    Profit $595,985    For the year, variable cost of goods sold...
At the end of the year, a company offered to buy 4,640 units of a product...
At the end of the year, a company offered to buy 4,640 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 68,500 units of the product that X Company has already made and sold to its regular customers: Sales $1,233,000 Cost of goods sold 603,485 Gross margin $629,515 Selling and administrative costs 145,905 Profit $483,610 For the year, fixed cost of goods sold...
At the end of the year, a company offered to buy 4,580 units of a product...
At the end of the year, a company offered to buy 4,580 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 60,000 units of the product that X Company has already made and sold to its regular customers: Sales $1,140,000    Cost of goods sold    491,400    Gross margin $648,600    Selling and administrative costs      150,000    Profit $498,600    For the year, fixed cost of goods sold...
At the end of the year, a company offered to buy 4,730 units of a product...
At the end of the year, a company offered to buy 4,730 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 60,100 units of the product that X Company has already made and sold to its regular customers: Sales $1,021,700    Cost of goods sold    502,436    Gross margin $519,264    Selling and administrative costs      158,063    Profit $361,201    For the year, fixed cost of goods sold...
At the end of the year, a company offered to buy 4,270 units of a product...
At the end of the year, a company offered to buy 4,270 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 64,100 units of the product that X Company has already made and sold to its regular customers: Sales $1,153,800    Cost of goods sold    519,851    Gross margin $633,949    Selling and administrative costs      168,583    Profit $465,366    For the year, variable cost of goods sold...
At the end of the year, a company offered to buy 4,390 units of a product...
At the end of the year, a company offered to buy 4,390 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 64,300 units of the product that X Company has already made and sold to its regular customers: Sales $1,221,700 Cost of goods sold  545,907    Gross margin $675,793 Selling and administrative costs 133,101 Profit $542,692 For the year, variable cost of goods sold were...
t the end of the year, a company offered to buy 4,140 units of a product...
t the end of the year, a company offered to buy 4,140 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 65,400 units of the product that X Company has already made and sold to its regular customers: Sales $1,242,600    Cost of goods sold 527,778    Gross margin $714,822    Selling and administrative costs 147,804    Profit $567,018    For the year,...
At the end of the year, a company offered to buy 4,140 units of a product...
At the end of the year, a company offered to buy 4,140 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 68,400 units of the product that X Company has already made and sold to its regular customers: Sales $1,299,600    Cost of goods sold    643,644    Gross margin $655,956    Selling and administrative costs      162,108    Profit $493,848    For the year, fixed cost of goods sold...