At the end of the year, a company offered to buy 5,000 units of a product from X
ID: 2462812 • Letter: A
Question
At the end of the year, a company offered to buy 5,000 units of a product from X Company for $11.00 each instead of the company's regular price of $17.00 each. The following functional income statement is for the 65,700 units of the product that X Company has already made and sold to its regular customers:
Fixed cost of goods sold for the year was $144,540, and fixed selling and administrative costs were $96,579. The special order product has some unique features that will require additional material costs of $0.74 per unit and the rental of special equipment for $3,500.
5. Profit on the special order would be
6. Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 4% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by
Explanation / Answer
Answer 5 $8950
Regular
Particulars
Total
Units
Per unit
Sales
1116900
65700
17
COGS
565020
Variable
420480
65700
6.4
Fixed
144540
Selling and admin cost
186588
Variable
90009
65700
1.37
Fixed
96579
Profit
365292
Additional order
Particulars
Total
Units
Per unit
Sales
55000
5000
11
COGS
Variable
32000
5000
6.4
Fixed
0
Selling and admin cost
Variable
6850
5000
1.37
Fixed
0
Additional material cost
3700
5000
0.74
Rental of equipment
3500
Profit on additional order
8950
Answer 6
Increase in profit = 12442-8950 = $3492
Selling and admin
186588
Fixed
96579
Sales commission 4%*1116900
44676
Variable
45333
67500
0.6716
Particulars
Total
Units
Per unit
Sales
55000
5000
11
COGS
Variable
32000
5000
6.4
Fixed
0
Selling and admin cost
Variable
3358
5000
0.6716
Fixed
0
Additional material cost
3700
5000
0.74
Rental of equipment
3500
Profit
12442
Regular
Particulars
Total
Units
Per unit
Sales
1116900
65700
17
COGS
565020
Variable
420480
65700
6.4
Fixed
144540
Selling and admin cost
186588
Variable
90009
65700
1.37
Fixed
96579
Profit
365292
Additional order
Particulars
Total
Units
Per unit
Sales
55000
5000
11
COGS
Variable
32000
5000
6.4
Fixed
0
Selling and admin cost
Variable
6850
5000
1.37
Fixed
0
Additional material cost
3700
5000
0.74
Rental of equipment
3500
Profit on additional order
8950
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.