At the end of the year, a company offered to buy 4,200 units of a product from X
ID: 2463474 • Letter: A
Question
At the end of the year, a company offered to buy 4,200 units of a product from X Company for $12.00 each instead of the company's regular price of $17.00 each The following functional income statement is for the 62,500 units of the product that X Company has already made and sold to its regular customers $1,062,500 Sales Cost of goods495,000 sold Gross margin $567,500 Selling and administrative155,625 costs Profit $411,875 Fixed cost of goods sold for the year was $125,000, and fixed selling and administrative costs were $68,750. The special order product has some unique features that will require additional material costs of $0.90 per unit and the rental of special equipment for $3,000 5. Profit on the special order would be $12,918 You are correct. vious Tries Your receipt no. is 6. Assume the following fact: regular variable selling and administrative costs include sales commissions equal to 2% of sales, but there will be no sales commissions on the special order. This will cause the special order profit to increase by 1,008 Submit AnswerIncorrect. Tries 2/3 Previous TriesExplanation / Answer
5. For special orders only variable cost is to be consider. Fixd cost should not to be consider
6.variable cost of selling & administrative cost = $155625 (Totalselling & administrative cost) - $68750(Fixed selling & administrative cost) / 62,500 units
=$86,875/62,500
=$1.39 per unit
In this $1.39 selling & administrative cost o one unit 2 % sales comission is also incuded which is to be deducted
= $1.39-$1.39* 2%
=$1.39- $.0278
=1.3622
Per unit decreasing of expenses = $.0278 * 4200
= $116.76
So , that the profit increases by $116.76 by decreasing the 2 % sales comission
ANSWER TO THE NEXT QUESTION
If the mail system is maintained by x company the total cost = $ 69,743
If the mail system is out sourced total cost =$15876(Hardware cost) + $5752 ( virus protection) + $11.80 * 3730
=$65642
It is observed that 4,101,is benifitable to x company by giving out sourcing to y with the comparision of self- maintainable cost
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