Last year, X Company sold 66,800 units of its only product for $19.00 each. Total costs were as follows: Cost of good...
Last year, X Company sold 66,800 units of its only product for $19.00 each. Total costs were as follows:
| Cost of goods sold | |
| Variable | $408,816 |
| Fixed | 143,620 |
| Selling and administrative | |
| Variable | $76,820 |
| Fixed | 77,488 |
At the end of the year, a company offered to buy 4,840 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 ?
| Tries 0/3 |
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 $0.72 and $0.21, respectively, and the rental of special equipment for $2,000. The combined effect of these changes would have been to reduce the special order profit by ?
| Tries 0/3 |
7. X Company's marketing manager felt that in order for regular sales to continue at 66,800 units this year, the company would have had to reduce the regular selling price this year to $18.54. The result of this price reduction would have been to reduce X Company's profits this year by?
Homework Answers
| 5.) | If X Company had accepted the special order, firm profits would have increased by | ||||||||||
| = Units Sold * (Selling Price - Variable Cost per unit) | |||||||||||
| = 4840 units * [12 - ($408816/66800 units)] | |||||||||||
| =4840 units*(12 -6.12) | |||||||||||
| $ 28,459.20 | |||||||||||
| 6) | The combined effect of these changes would have been to reduce the special order profit by | ||||||||||
| Additional Cost | |||||||||||
| = (4840 units * $0.72)+(4840*$0.21)+$2000 | |||||||||||
| =$6501.2 | |||||||||||
| Therefore profit will reduce by $6501.2 | |||||||||||
| 7) | The result of this price reduction would have been to reduce X Company's profits this year by | ||||||||||
| = 66800 units * ($19 -$18.54) | |||||||||||
| =$30,728 | |||||||||||
Add Answer to:
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