Question
X Company produces and sells 60,500 units of its regular product each year for $13.00 each. The following cost information relates to this production: Total
X Company produces and sells 60,500 units of its regular product each year for $13.00 each. The following cost information relates to this production:
Total | Per-Unit | |
Direct materials | $115,555 | $1.91 |
Direct labor [all variable] | 88,935 | 1.47 |
Variable overhead | 165,165 | 2.73 |
Fixed overhead | 121,000 | 2.00 |
Variable selling | 78,045 | 1.29 |
Fixed selling | 78,650 | 1.30 |
A company has offered to buy 4,650 units for $11.85 each. Because the special order product is slightly different than the regular product, X Company will have to rent some equipment at a cost of $16,000. Profit on the special order is ?
Assume that if X Company accepts the special order, it will have to lower the selling price on each of its regular units to $12.51. Independent of #1, the effect of lowering the selling price will be to decrease company profits by?
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