Question

X Company produces 65,300 units of its regular product each year and sells each one for $14.00. The following cost information is available: Total Per-Unit Direct materials $114,928 $1.76 Direct labor 99,909 1.53 Variable overhead 195,900 3.00 Fixed overhead 121,458 1.86 Variable selling 86,849 1.33 Fixed selling 81,625 1.25 Total $700,669 $10.73 A company has offered to buy 4,130 units for $13.48 each. Because the special order product is slightly different than the regular product, direct material costs will increase to $1.91 per unit, and some special equipment will have to be rented for a total of $19,000. 1. What would profit on the special order be? A: $-4,119 B: $-3,678 C: $-2,308 D: $2,065 E: $2,948 F: $4,582 Tries 0/99 2. Assume that if X Company accepts the special order, regular sales would fall by 1,000 units. The effect of this fall in regular sales would be to decrease company profit by A: $3,405 B: $3,983 C: $4,661 D: $5,453 E: $6,380 F: $7,465

Answer 1

Answer- 1)- Profit would be on special order = $4582.

Explanation-

Profit on special order
Partciulars		Amount
		$
Sales price	4130 units*$13.48 per unit	55672
Less- Costs
Direct materials	4130 units*$1.91 per unit	7888
Direct labor	4130 units*$1.53 per unit	6319
Variable overhead	4130 units*$3.00 per unit	12390
Variable selling	4130 units*$1.33 per unit	5493
Rent on special equipment		19000
Total costs		51090
Profit on special order $		4582

2)- The effect of this fall in regular sales would be to decrease company profit by = $6380.

Explanation-

Profit decrease in regular sales
Partciulars		Amount
		$
Sales price	1000 units*$14 per unit	14000
Less- Costs
Direct materials	1000 units*$1.76 per unit	1760
Direct labor	1000 units*$1.53 per unit	1530
Variable overhead	1000 units*$3.00 per unit	3000
Variable selling	1000 units*$1.33 per unit	1330
Total costs		7620
Net Profit $		6380