At the end of the year, a company offered to buy 4,320 units of a...
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Accounting
At the end of the year, a company offered to buy 4,320 units of a product from X Company for $12.00 each instead of the company's regular price of $17.00 each. The following income statement is for the 69,400 units of the product that X Company has already made and sold to its regular customers:
Sales $1,179,800
Cost of goods sold 595,452
Gross margin $584,348
Selling and administrative costs 183,216
Profit $401,132
For the year, variable cost of goods sold were $464,286, and variable selling and administrative costs were $86,056. The special order product has some unique features that will require additional material costs of $0.75 per unit and the rental of special equipment for $2,000.
1. Profit on the special order would be
2. 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 $0.16. The effect of reducing the selling price will be to decrease firm profits by
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