X Company produces 68,800 units of its regular product each year and sells each one for...

X Company produces 68,800 units of its regular product each year and sells each one for $13.00. The following cost information is available:

	Total	Per-Unit
Direct materials	$145,168	$2.11
Direct labor	116,960	1.70
Variable overhead	221,536	3.22
Fixed overhead	149,984	2.18
Variable selling	90,816	1.32
Fixed selling	86,000	1.25
Total	$810,464	$11.78

A company has offered to buy 4,160 units for $13.45 each. Because the special order product is slightly different than the regular product, direct material costs will increase by $0.20 per unit, and some special equipment will have to be rented for a total of $17,000.

1. What would profit on the special order be?

Tries 0/3

2. Assume that if X Company accepts the special order, regular sales would fall to 67,700 units. The effect of this fall in regular sales would be to decrease company profit by

Tries 0/3

Expert Solution

1)	Calculation of profit on special order

	Sales	55,952	(4160*13.45)
	Less:
	Direct Material Cost	9,610
	Direct labour	7,072
	Variable Overhead	13,395
	Variable selling	5,491
	Rental of special equipment	17,000

	profit	3,384

	Correct Option : F

2)	Decrease in profit due to decrease in sales would be = No. of Units sold decrease * contribution margin per unit
	=1100*4.65
	5115




	Calculation of contribution margin per unit

	Selling Price	13.00
	Less:
	Direct Material Cost	2.11
	Direct labour	1.70
	Variable Overhead	3.22
	Variable selling	1.32

	Contribution margin per unit	4.65

ekkarill92 answered 2 years ago

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