At the end of the year, a company offered to buy 4,420 units of a product from X
ID: 2452953 • Letter: A
Question
At the end of the year, a company offered to buy 4,420 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $19.00 each. The following information relates to the 66,400 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 $0.72 per unit and the rental of special equipment for $5,000.
5. Profit on the special order would be
6. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 650 units. The effect of this loss of sales will be to decrease firm profits by
Total Per-Unit Revenue $1,261,600 $19.00 Cost of Goods Sold Variable 428,280 6.45 Fixed 142,760 2.15 Selling and Administrative Costs Variable 94,952 1.43 Fixed 86,984 1.31 Profit $508,624 $7.66Explanation / Answer
The profit will decrease by 12,350 = 508,624 - 496,274
Total Per-Unit Additional 4420 units cost Revenue $1,261,600 $19 66400 11 Cost of Goods Sold Variable 428,280 6.45 66400 7.17 Fixed 142,760 2.15 66400 2.09 Selling and Administrative Costs Variable 94,952 1.43 66400 1.43 Fixed 86,984 1.31 66400 1.31 Profit $508,624 $7.66 -1.00Related Questions
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