Question
As of December 1, 2021, X Company had produced and sold 63,300 units of its only product. The following is the company's December 1 Income
As of December 1, 2021, X Company had produced and sold 63,300 units of its only product. The following is the company's December 1 Income Statement:
Total | Per-Unit | ||
Sales | $859,614 | $13.58 | |
Cost of goods sold | 538,050 | 8.50 | |
Gross profit | 321,564 | 5.08 | |
Selling & administrative costs | 139,260 | 2.20 | |
Profit | $182,304 | $2.88 |
Analysis of cost of goods sold reveals that $417,780 of it was variable; a similar analysis of selling & administrative costs reveals that $75,960 of it was fixed.
On December 2, a company offered to buy 4,640 units for $12.20 each. Because the special order product was slightly different than the regular product, direct material costs were expected to increase by $0.15 per unit, and some special equipment would have to be rented for a total of $18,000.
4. What would profit have been on the special order?
5. If X Company had accepted the special order, it would have had to lower the selling price of its regular product to $13.11 per unit to prevent the loss of regular customers. This price reduction would have decreased company profits by
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