Question
Last year, X Company sold 63,900 units of its only product for $17.00 each. Total costs were as follows: Cost of goods sold Variable $417,267
Last year, X Company sold 63,900 units of its only product for $17.00 each. Total costs were as follows:
Cost of goods sold | |
Variable | $417,267 |
Fixed | 119,493 |
Selling and administrative | |
Variable | $68,373 |
Fixed | 88,821 |
At the end of the year, a company offered to buy 4,530 units of the product for $12.00 each instead of $17.00. X Company's production manager thought that the special order units would probably require additional variable costs per unit of $1.01 and the rental of special equipment for $1,500. X Company had the capacity to produce the additional units, and there would have been no selling and administrative costs for the special order. But X Company still rejected the order. If X Company had accepted the special order, firm profits would have increased by $18,704
There was concern that regular customers would have found out about the special order, and X Company's regular sales this year would have fallen by 950 units. The result of these lost sales would have been to reduce X Company's profits this year by___
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