At the end of the year, a company offered to buy 4,560 units of a...
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Accounting
At the end of the year, a company offered to buy 4,560 units of a product from X Company for $12.00 each instead of the company's regular price of $19.00 each. The following income statement is for the 63,400 units of the product that X Company has already made and sold to its regular customers:
Sales
$1,204,600
Cost of goods sold
512,906
Gross margin
$691,694
Selling and administrative costs
159,768
Profit
$531,926
For the year, fixed cost of goods sold were $131,238, and fixed selling and administrative costs were $71,642. The special order product has some unique features that will require additional material costs of $0.84 per unit and the rental of special equipment for $4,500. 4. Profit on the special order would be
A: $5,747
B: $6,724
C: $7,867
D: $9,204
E: $10,769
F: $12,600
5. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost unless the selling price for them is reduced by $0.14. The effect of reducing the selling price will be to decrease firm profits by
A: $5,681
B: $7,101
C: $8,876
D: $11,095
E: $13,869
F: $17,336
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