Question
X Company produces 67,700 units of its regular product each year and sells each one for $14.00. The following cost information is available: Total Per-Unit
X Company produces 67,700 units of its regular product each year and sells each one for $14.00. The following cost information is available:
Total | Per-Unit | |
Direct materials | $154,356 | $2.28 |
Direct labor | 123,891 | 1.83 |
Variable overhead | 199,715 | 2.95 |
Fixed overhead | 137,431 | 2.03 |
Variable selling | 89,364 | 1.32 |
Fixed selling | 68,377 | 1.01 |
Total | $773,134 | $11.42 |
A company has offered to buy 4,070 units for $13.71 each. Because the special order product is slightly different than the regular product, direct material costs will increase to $2.48 per unit, and some special equipment will have to be rented for a total of $13,000.
Question: Assume that if X Company accepts the special order, regular sales would fall by 1,050 units. The effect of this fall in regular sales would be to decrease company profit by?
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