The following cost functions apply to X Company's regular production and sales during the year:...
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Accounting
The following cost functions apply to X Company's regular production and sales during the year:
Cost of goods sold: $5.90 (X) + $130,112
Selling and administrative expenses: $1.40 (X) + $63,840
where X is the number of units produced and sold. During the year, X Company sold 60,800 units for $17.00 each. At the end of the year, a company offered to buy 4,570 units but was only willing to pay $11.00 each. X Company had the capacity to produce the additional 4,570 units. 5. If X Company had accepted the special order, firm profits would have increased by
6. Consider the following three changes. Direct material costs on the special order would have increased by $0.73 per unit, direct labor costs on the special order would have decreased by $0.44 per unit, and X Company would have had to rent special equipment for $2,000. Independent of your answer to (5), the effect of these changes would have been to reduce profit on the special order by
7. In order to retain all of X Company's regular customers, it would have had to reduce the regular selling price by $0.42. If the selling price were reduced and next year's unit sales turned out to be the same as this year's sales, firm profits would have fallen by
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