At the end of the year, a company offered to buy 4,920 units of a product from X
ID: 2574980 • Letter: A
Question
At the end of the year, a company offered to buy 4,920 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 61,200 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 $113,832, and fixed period costs were $70,380. Variable period costs include selling commissions equal to 2% of revenue.
5. Profit on the special order is $25,092 (this is right)
6. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.80 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit?______
The following information is for X Company's two products, A and B, last year:
Because of the reported loss for Product A, X Company is considering dropping it. Further analysis reveals that $25,130 of Product A's fixed costs and $7,510 of Product B's fixed costs are common costs that the company allocates to the two products.
7. If X Company drops Product A, company profits will change by $-14,853 (this is right)
8. Assume that sales of Product B can be increased by $17,510 if Product A is dropped. What will be the effect of this increase on company profits? _____.
NEED HELP WITH 6 AND 8
Per-Unit Total Cost of goods sold $7.61 $465,732 Period costs 2.30 140,760 Total $9.91 $606,492Explanation / Answer
variable cost of goods sold per unit = (465732-113832)/61200= 5.75 Variable Period costs =(140760-70380)/61200= 1.15 Variable commissions = 19*2%= 0.38 5 Incremental revenue 59040 =4920*12 Less:Variable costs 33948 =4920*(5.75+1.15) Profit on the special order 25092 6 Incremental revenue 59040 =4920*12 Less:Variable costs 36014 =4920*(5.75+0.8+1.15-0.38) Profit on the special order 23026 Effect of these two changes on the special order profit wil be decease of $2066 or -2066(23026-25092) 8 Contribution margin ratio = (94280-56568)/94280= 40% Effect of this increase on company profits = 17510*40%= 7004
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