At the end of the year, a company offered to buy 4,830 units of a product from X
ID: 2463608 • Letter: A
Question
At the end of the year, a company offered to buy 4,830 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following functional income statement is for the 64,900 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 $120,065, and fixed selling and administrative costs were $75,933. The special order product has some unique features that will require additional material costs of $0.85 per unit and the rental of special equipment for $3,000.
5. Profit on the special order would be ?
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?
Sales $1,233,100 Cost of goods sold 543,862 Gross margin $689,238 Selling and administrative costs 154,462 Profit $534,776Explanation / Answer
Special Order
Particulars Per Unit 64900 Units Sales 19 1233100 Less: Variable cost Cost of Goods Sold (543862-120065) 6.53 423797 Sales commission (Sales*2%) 0.38 24662 Other Selling and administrative cost (154462-75933-24662) 0.83 53867 Contribution 11.26 730774 Less: Fixed Cost Cost of Goods Sold 120065 Selling and administrative cost 75933 Net Operating Income 534776Related Questions
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