Question
The following cost functions apply to X Company's regular production and sales during the year: Cost of goods sold: $6.57 (X) + $127,397 Selling and
The following cost functions apply to X Company's regular production and sales during the year:
Cost of goods sold: $6.57 (X) + $127,397
Selling and administrative expenses: $1.29 (X) + $84,709
where X is the number of units produced and sold. During the year, X Company sold 66,700 units for $18.00 each. At the end of the year, a company offered to buy 4,750 units but was only willing to pay $12.00 each. X Company had the capacity to produce the additional 4,750 units. 5. If X Company had accepted the special order, firm profits would have increased by ?
6. Consider the following three changes. Direct material costs on the special order would have increased by $0.74 per unit, direct labor costs on the special order would have decreased by $0.32 per unit, and X Company would have had to rent special equipment for $1,500. Independent of your answer to (5), the effect of these changes would have been to reduce profit on the special order by ?
7. In order to retain all of X Company's regular customers, it would have had to reduce the regular selling price by $0.39. If the selling price were reduced and next year's unit sales turned out to be the same as this year's sales, firm profits would have fallen by ?
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