Question
Questions 4 and 5 refer to the following problem: At the end of the year, a company offered to buy 4,860 units of a product
Questions 4 and 5 refer to the following problem:
At the end of the year, a company offered to buy 4,860 units of a product from X Company for $11.00 each instead of the company's regular price of $18.00 each. The following income statement is for the 62,000 units of the product that X Company has already made and sold to its regular customers:
Sales | $1,116,000 | |
Cost of goods sold | 558,620 | |
Gross margin | $557,380 | |
Selling and administrative costs | 140,740 | |
Profit | $416,640 |
For the year, fixed cost of goods sold were $133,300, and fixed selling and administrative costs were $72,540. 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 $2,000. 4. Profit on the special order would be
A: $4,435 | B: $6,430 | C: $9,324 | D: $13,520 | E: $19,603 | F: $28,425 |
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 $0.10. The effect of reducing the selling price will be to decrease firm profits by
A: $6,200 | B: $7,254 | C: $8,487 | D: $9,930 | E: $11,618 | F: $13,593 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started