At the end of the year, a company offered to buy 4,310 units of a product from X

Question

At the end of the year, a company offered to buy 4,310 units of a product from X Company for a special price of $12.00 each instead of the company's regular price of $19.00 each. The following information relates to the 69,200 units of the product that X Company made and sold to its regular customers during the year: Cost of goods sold Period costs Total Per-Unit $8.69 2.74 Total $601,348 189,608 $11.43 $790,956 Fixed cost of goods sold for the year were $146,704, and fixed period costs were $99,648. Variable period costs include selling commissions equal to 4% of revenue 5. Profit on the special order is Submit Answer Tries 0/s 6. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.83 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit?

Explanation / Answer

5. Profit on the special order is: $21076

6. Special order profit will increase by $301.60

Notes and calculations:

Selling price per unit $ 12 12 Variable costs: Cost of goods sold ($601348 - $146704)/69200 6.57 5.74 Period costs 0.54 1.3 Total variable costs 7.11 7.04 Contribution per unit $ 4.89 4.96 Number of units ordered 4310 4310 Profit on special order $ 21076 21377.60

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