Question

At the end of the year, a company offered to buy 4,200 units of a product from X Company for a special price of $11.00 each instead of the company's regular price. The following information relates to the 69,100 units of the product that X Company has already made and sold to its regular customers:

			Total	Per-Unit
Revenue			$1,312,900	$19.00
Cost of Goods Sold
Variable			463,661	6.71
Fixed			128,526	1.86
Selling and Administrative Costs
Variable			95,358	1.38
Fixed			71,864	1.04
Profit			$553,491	$8.01

The special order product has some unique features that will require additional material costs of $0.90 per unit and the rental of special equipment for $3,000.

The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 800 units. This loss in sales will cause firm profits to fall by ______________?

Answer 1

	CALCULATION OF THE PROFIT ON THE SALE OF SPECIAL ORDER
		Units	Rate	Amount
	Sales Revenue	4200	$                   11.00	$          46,200.00
	Less : Variable Cost of Goods Sold	4200	$                      6.71	$          28,182.00
	Less: Selling and Administrative Cost	4200	$                      1.38	$             5,796.00
	Less: addittional Material cost	4200	$                      0.90	$             3,780.00
	Less: Rental Equipment			$             3,000.00
				$             5,442.00
	Answer = profit increase by $ 5,442
	Answer = CALCULATION OF THE LOSS IF THE SPECIAL ORDER ACCEPTED
		Units	Rate	Amount
	Revenue	68300	$                   19.00	$          12,97,700
	Less: Variable Cost of Goods Sold	68300	$                      6.71	$             4,58,293
	Less: Selling and Administrative Cost	68300	$                      1.38	$                94,254
	Less: Fixed Cost
	Fixed Cost of Goods sold			$             1,28,526
	Fixed Cost of Selling and administrative Expenses			$                71,864
	Net Revenue with 68,300 Units(A)			$             5,44,763
	Net Revenue with 69,100 units (B)			$             5,53,491
	Loss from the accepting the special project(B-A)			$                   8,728
	So if we accept the special order than the profit will be fall by $ 8,728