Last year, X Company sold 61,900 units of its only product for $19.00 each. Total costs were as follows:
Cost of goods sold Variable $393,684 Fixed 118,848
Selling and administrative Variable$64,376 Fixed 82,946
At the end of the year, a company offered to buy 4,400 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 the offer.
1. If X Company had accepted the special order, firm profits would have increased by ?
2. X Company's production manager thought that the special order units might have required additional direct material and direct labor costs per unit of $0.88 and $0.26, respectively, and the rental of special equipment for $1,000. The combined effect of these changes would have been to reduce the special order profit by ?
3. X Company's marketing manager felt that in order for regular sales to continue at 61,900 units this year, the company would have had to reduce the regular selling price this year to $18.52. The result of this price reduction would have been to reduce X Company's profits this year by ?
1 | ||
Variable cost of goods sold | 6.36 | =393684/61900 |
Incremental revenue | 48400 | =4400*11 |
Incremental costs: | ||
Variable cost of goods sold | 27984 | =4400*6.36 |
Total Incremental costs | 27984 | |
Profits increase | 20416 | |
2 | ||
Increase in cost of goods sold | 5016 | =4400*(0.88+0.26) |
Rental of Equipment | 1000 | |
Total reduction in special order profit | 6016 | |
3 | ||
Reduction in Profits | 29712 | =61900*(19-18.52) |
Last year, X Company sold 61,900 units of its only product for $19.00 each. Total costs...
Last year, X Company sold 61,900 units of its only product for $19.00 each. Total costs were as follows: Cost of goods sold Variable S412,254 137,418 Fixed Selling and administrative Variable Fixed $77,375 76,756 At the end of the year, a company offered to buy 4,360 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...
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 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
Selling and administrative
Variable
$86,966
Fixed
79,827
At the end of the year, a company offered to buy 4,170 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...
Last year, X Company sold 67,200 units of its only product for
$17.00 each. Total costs were as follows:
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...
Last year, X Company sold 66,100 units of its only product for $18.00 each. Total costs were as follows: Cost of goods sold Variable $442,209 Fixed 120,302 Selling and administrative Variable $78,659 Fixed 66,100 At the end of the year, a company offered to buy 4,100 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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