At the end of the year, a company offered to buy 4,200 units of a product from X
ID: 2574944 • Letter: A
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 of $18.00 each. The following information relates to the 67,400 units of the product that X Company made and sold to its regular customers during the year:
Fixed cost of goods sold for the year were $148,280, and fixed period costs were $94,360. Variable period costs include selling commissions equal to 2% of revenue.
1. Profit on the special order is____?
2. Assume the following two changes for the special order: 1) variable cost of goods sold will increase by $0.72 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit?
Per-Unit Total Cost of goods sold $7.8 $525,720 Period costs 2.68 180,632 Total $10.48 $706,352Explanation / Answer
variable cost of goods sold per unit =(525720-148280)/67400= 5.6 Variable Period costs =(180632-94360)/67400= 1.28 Variable commissions = 18*2%= 0.36 1 Incremental revenue 46200 =4200*11 Less:Variable costs 28896 =4200*(5.6+1.28) Profit on the special order 17304 2 Incremental revenue 46200 =4200*11 Less:Variable costs 30408 =4200*(5.6+1.28+0.72-0.36) Profit on the special order 15792 Effect of these two changes on the special order profit wil be decease of $1512 or -1512(15792-17304)
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.