Last year, X Company sold 66,300 units of its only product for $19.00 each. Total costs were as follows:
Cost of goods sold | |
Variable | $454,155 |
Fixed | 124,644 |
Selling and administrative | |
Variable | $92,820 |
Fixed | 75,582 |
At the end of the year, a company offered to buy 4,340 units of the
product but only for $12.00 each. X Company had the capacity to
produce the additional units, and even though there would have been
no additional selling and administrative costs, it rejected the
offer.
5. If X Company had accepted the special order, firm profits would
have increased by
6. X Company's production manager thought that the special order units might have required additional direct material and direct labor costs per unit of $0.82 and $0.21, respectively, and the rental of special equipment for $1,500. The combined effect of these changes would have been to reduce the special order profit by
7. X Company's marketing manager felt that in order for regular
sales to continue at 66,300 units this year, the company would have
had to reduce the regular selling price this year to $18.44. The
result of this price reduction would have been to reduce X
Company's profits this year by
Per unit | ||
Sales (68,400*$19) | $1,299,600 | $19 |
Variable cost of goods sold | $387,828 | $5.67 |
Variable selling and administrative expenses | $77,292 | $1.13 |
Contribution margin | $834,480 | $12.2 |
Fixed cost of goods sold | $149,796 | |
Fixed selling and administrative expenses | $102,600 | |
Net income | $582,084 |
5. Relevant costs are variable cost of goods sold.
Increase in profit = ($11 - $5.67) * 4,090 = $21,800 (rounded to 0 decimal places)
6. Relevant costs = Variable cost of goods sold + Additional costs + Special equipment
= ($5.67 + $0.9 + $0.27) * 4,090 + $1,500
= $29,475.6
Profit from special order = 4,090 * $11 = $44,990
Profit = $44,990 - $29,475.6
= $15,514.4
Reduction in profit = $21,800 - $15,514.4
= $6,286 (rounded to 0 decimal places)
7.
Per unit | ||
Sales (68,400*$19) | $1,277,028 | $18.67 |
Variable cost of goods sold | $387,828 | $5.67 |
Variable selling and administrative expenses | $77,292 | $1.13 |
Contribution margin | $811,908 | $11.87 |
Fixed cost of goods sold | $149,796 | |
Fixed selling and administrative expenses | $102,600 | |
Net income | $559,512 |
Reduction in profit = $582,084 - $559,512 = $22,572
Last year, X Company sold 66,300 units of its only product for $19.00 each. Total costs...
Last year, X Company sold 66,300 units of its only product for $19.00 each. Total costs were as follows: Cost of goods sold Variable $454,155 Fixed 124,644 Selling and administrative Variable $92,820 Fixed 75,582 At the end of the year, a company offered to buy 4,340 units of the product but only for $12.00 each. X Company had the capacity to produce the additional units, and even though there would have been no additional selling and administrative costs, it rejected...
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Last year, X Company sold 68,400 units of its only product for $19.00 each. Total costs were as follows: Cost of goods sold Variable Fixed Selling and administrative Variable Fixed $387,828 149,796 $77,292 102,600 At the end of the year, a company offered to buy 4,090 units of the product but only for $11.00 each. X Company had the capacity to produce the additional units, and even though there would have been no additional selling and administrative costs, it rejected...
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Last year, X Company sold 64,900 units of its only product for
$18.00 each. Total costs were as follows:
Cost of goods sold
Variable
$425,095
Fixed
145,376
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Variable
$86,966
Fixed
79,827
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produce the additional units, and even though there would have been
no additional selling and administrative costs, it rejected...
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At the end of the year, a company offered to buy 4,780 units of
the product but only for $12.00 each. X Company had the capacity to
produce the additional units, and even though there would have been
no additional selling and administrative costs, it rejected the
offer.
5. If X Company had accepted the special order, firm profits would
have...
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