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Last year, X Company sold 66,300 units of its only product for $19.00 each. Total costs...

Last year, X Company sold 66,300 units of its only product for $19.00 each. Total costs were as follows:

Cost of goods sold
   Variable $454,155
   Fixed 124,644
Selling and administrative
   Variable $92,820
   Fixed 75,582


At the end of the year, a company offered to buy 4,340 units of the product but only for $12.00 each. X Company had the capacity to produce the additional units, and even though there would have been no additional selling and administrative costs, it rejected the offer.

5. If X Company had accepted the special order, firm profits would have increased by_

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Answer #1

The increase in income would be $22,351

Working

financial advantage (disadvantage) of accepting the special order
Additional Revenue from offer (4340 x $12) $        52,080.00
Less: Total Additional cost due to acceptance of offer $        29,729.00
Financial Advantage of accepting order $        22,351.00

.

Calculation of Additional Cost of Order
Per Unit Total
Variable manufacturing cost $ 6.85 $          29,729.00
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