Questions 4 and 5 refer to the following problem:

At the end of the year, a company offered to buy 4,090 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 64,000 units of the product that X Company has already made and sold to its regular customers:

Sales		$1,216,000
Cost of goods sold		510,080
Gross margin		$705,920
Selling and administrative costs		173,440
Profit		$532,480

For the year, fixed cost of goods sold were $121,600, and fixed selling and administrative costs were $90,880. The special order product has some unique features that will require additional material costs of $0.71 per unit and the rental of special equipment for $2,500. 4. Profit on the special order would be

A: $8,687

B: $10,859

C: $13,574

D: $16,967

E: $21,209

F: $26,511

Tries 0/99

5. 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 $0.17. The effect of reducing the selling price will be to decrease firm profits by

A: $4,962

B: $5,806

C: $6,793

D: $7,948

E: $9,299

F: $10,880