Questions 5 and 6 refer to the following information At the end of the year, a c

Question

Questions 5 and 6 refer to the following information At the end of the year, a company offered to buy 4,690 units of a product from X Company for a special price of $11.00 each instead of the company's regular price of $19.00 each. The following information relates to the 66,300 units of the product that X Company made and sold to its regular customers during the year Per-Unit Total Cost of goods sold 7 $504,543 2.56 169,728 S10.17 $674,271 Period costs Total Fixed cost of goods sold for the year were $126,633, and fixed period costs were $72,267 variable period costs include selling commissions equal to 2% ofrevenue. 5. Profit on the special order is Submit Answer Tries 0/5 6. Assume the following two changes for the special order: 1) variable cost of goods sold will increase by $0.90 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit? Tries 0/5 ubmit Answer

Explanation / Answer

5) Profit on special order will be $17,962.70. Fixed cost is irrelevant in decision making as it will be incurred otherwise also.

6) Profit on special order will be $14,773.50. Profit will decrease by $3,189.20. Fixed cost is irrelevant in decision making as it will be incurred otherwise also.

Particulars Per unit 4690 units Sales (a) $    11.00 $ 51,590.00 Less: Variable cost Cost of goods sold $       5.70 $ 26,733.00 Period Cost Selling Commission @2% ($1.47-$0.22) $       0.22 $    1,031.80 Other $       1.25 $    5,862.50 Total varaibale cost (b) $ 33,627.30 Contribution Margin c = a-b $ 17,962.70

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