Question
X Company produces and sells 61,900 units of its regular product each year for $14.00 each. The following cost information relates to this production: Total
X Company produces and sells 61,900 units of its regular product each year for $14.00 each. The following cost information relates to this production:
Total | Per-Unit | |
Direct materials | $101,516 | $1.64 |
Direct labor | 69,947 | 1.13 |
Variable overhead | 195,604 | 3.16 |
Fixed overhead | 133,704 | 2.16 |
Variable selling | 72,423 | 1.17 |
Fixed selling | 82,327 | 1.33 |
A company has offered to buy 4,300 units for $11.72 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. What is profit on the special order?
Assume that if X Company accepts the special order, it will have to lower the selling price on each of its regular units to $13.44. Independent of #1, the effect of lowering the selling price will be to decrease profit by how much?
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