Question
Last year, X Company sold 67,800 units of its only product for $18.00 each. Total costs were as follows: Cost of goods sold Variable $397,308
Last year, X Company sold 67,800 units of its only product for $18.00 each. Total costs were as follows:
Cost of goods sold | |
Variable | $397,308 |
Fixed | 126,108 |
Selling and administrative | |
Variable | $73,902 |
Fixed | 94,242 |
At the end of the year, a company offered to buy 4,660 units of the product but only for $12.00 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
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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 $0.72 and $0.21, respectively, and the rental of special equipment for $2,000. The combined effect of these changes would have been to reduce the special order profit by
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7. X Company's marketing manager felt that in order for regular sales to continue at 67,800 units this year, the company would have had to reduce the regular selling price this year to $17.54. The result of this price reduction would have been to reduce X Company's profits this year by
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