At the end of the year, a company offered to buy 4,030 units of a...
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Accounting
At the end of the year, a company offered to buy 4,030 units of a product from X Company for $11.00 each instead of the company's regular price of $17.00 each. The following income statement is for the 64,500 units of the product that X Company has already made and sold to its regular customers:
Sales
$1,096,500
Cost of goods sold
532,125
Gross margin
$564,375
Selling and administrative costs
179,955
Profit
$384,420
For the year, variable cost of goods sold were $395,385, and variable selling and administrative costs were $85,140. The special order product has some unique features that will require additional material costs of $0.71 per unit and the rental of special equipment for $3,500. 4. Profit on the special order would be
A: $4,873
B: $5,506
C: $6,222
D: $7,031
E: $7,945
F: $8,978
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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: $4,119
B: $4,819
C: $5,638
D: $6,597
E: $7,718
F: $9,030
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