At the end of the year, a company offered to buy 4,380 units of a product from X
ID: 2452843 • Letter: A
Question
At the end of the year, a company offered to buy 4,380 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $17.00 each. The following information relates to the 63,000 units of the product that X Company has already made and sold to its regular customers:
The special order product has some unique features that will require additional material costs of $0.88 per unit and the rental of special equipment for $4,500.
Q5. Profit on the special order would be_____?____
Q6. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 600 units. The effect of this loss of sales will be to decrease firm profits by_____?______
Total Per-Unit Revenue Cost of Goods Sold $1,071,000 $17.00 Variable Fixed 412,020 113,400 6.54 1.80 Selling and Administrative Costs Variable Fixed 82,530 91,350 $371,700 1.31 1.45 $5.90 ProfitExplanation / Answer
Statement showing evaluation of special Order Particulars Amount Sales Revenue =4380*11 48,180.00 Variable COGS = 4380*6.54 28,645.20 Additional Mat Cost = 4380*.88 3,854.40 Rental of Special Equipment 4,500.00 Income = Sales - Costs 11,180.40 Note: Fixed Costs remain unaffected by the order Variable selling costs are ignored since this is special order Particulars Amount Sales Revenue Lost =600*17 10,200.00 Variable COGS = 600*6.54 3,924.00 Variable selling and Admin = 600*1.31 786.00 Reduction in firms Profits due to loss of sales 5,490.00
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