Question
Last year, X Company sold 62,500 units of its only product for $18.00 each. Total costs were as follows: Cost of goods sold Variable $443,125
Last year, X Company sold 62,500 units of its only product for $18.00 each. Total costs were as follows:
Cost of goods sold | |
Variable | $443,125 |
Fixed | 130,000 |
Selling and administrative | |
Variable | $90,000 |
Fixed | 65,625 |
At the end of the year, a company offered to buy 4,680 units of the product but only for $11.00 each. X Company had the capacity to produce the additional units, and even though there would have been no additional selling and administrative costs, it rejected the offer. 5. If X Company had accepted the special order, firm profits would have increased by?
6. X Company's production manager thought that the special order units might have required additional direct material and direct labor costs per unit of $0.78 and $0.21, respectively, and the rental of special equipment for $1,500. The combined effect of these changes would have been to reduce the special order profit by?
7. X Company's marketing manager felt that in order for regular sales to continue at 62,500 units this year, the company would have had to reduce the regular selling price this year to $17.43. The result of this price reduction would have been to reduce X Company's profits this year by?
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