60.1K

Verified Solution

Link Copied!

Near the end of 2020, X Company had produced and sold 66,400 units of its only product. Costs for these units were:

	Total	Per-Unit
Direct materials	$152,720	$2.30
Direct labor	119,520	1.80
Variable overhead	179,280	2.70
Fixed overhead	139,440	2.10
Variable selling and administration	86,984	1.31
Fixed selling and administration	99,600	1.50
Total	$777,544	$11.71

Just before the year ended, a company offered to buy 4,170 units for $14.18 each. X Company had the capacity to produce the additional 4,170 units, but because the special order product was slightly different than the regular product, direct material costs were expected to increase by $0.15 per unit, and some special equipment would have to be rented for a total of $17,000.

4. What would profit have been on the special order?

A: $4,799

B: $5,615

C: $6,570

D: $7,686

E: $8,993

F: $10,522

Tries 0/99

5. Assume that if X Company had accepted the special order, it would have had to lower the selling price of its regular product to prevent the loss of regular customers. The price of its regular product is normally set at 20% above total manufacturing cost per unit, but it would have to reduce it to $10.38 per unit. The effect of lowering the selling price would have been to decrease company profits by

A: $14,977

B: $19,920

C: $26,494

D: $35,236

E: $46,865

F: $62,330

Answer & Explanation Solved by verified expert

See Answer