Question
At the end of the year, a company offered to buy 4,630 units of a product from X Company for $11.00 each instead of the
At the end of the year, a company offered to buy 4,630 units of a product from X Company for $11.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 68,700 units of the product that X Company has already made and sold to its regular customers:
Sales | $1,305,300 | |
Cost of goods sold | 599,064 | |
Gross margin | $706,236 | |
Selling and administrative costs | 169,002 | |
Profit | $537,234 |
For the year, variable cost of goods sold were $460,977, and variable selling and administrative costs were $99,615. The special order product has some unique features that will require additional material costs of $0.72 per unit and the rental of special equipment for $3,000. (2 Parts) 1. Profit on the special order would be :
2 The marketing manager thinks that if X Company accepts the special order, regular customers will be lost unless the selling price for them is reduced by $0.11. The effect of reducing the selling price will be to decrease firm profits by (is the answer 8,539) ?
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