At the end of the year, a company offered to buy 4,200 units of a product from X

Question

At the end of the year, a company offered to buy 4,200 units of a product from X Company for a special price of $11.00 each instead of the company's regular price. The following information relates to the 69,100 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 $0.90 per unit and the rental of special equipment for $3,000.

Profit on the special order would be _____________?

Total    Per-Unit Revenue $1,312,900 $19.00    Cost of Goods Sold    Variable 463,661 6.71       Fixed 128,526 1.86    Selling and Administrative Costs    Variable   95,358   1.38       Fixed     71,864   1.04    Profit $553,491 $8.01   

Explanation / Answer

Incremental analysis :

Profit on the special order would be $5442

Incremental revenue (4200*11) 46200 Incremental cost Variable cost of goods sold (4200*6.71) (28182) Variable selling and administrative expense (4200*1.38) (5796) Additional material (4200*.90) (3780) Special equipment (3000) Total incremental cost (40758) Incremental profit (loss) 5442

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