Question

fi, and 7 refer to the following information elev Lawr, X Car Company sold 66,700 units of its only product for $19.00 each. Total costs were as follows: Cost of goods sold Variable $440,367 Fixed 140,835 Selling and administrative Variable $83,814 Fixed 88,623 At the end of the year, a company offered to buy 4.110 units of the product but only for $11.00 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 8 pts. If X Company liad accepted the special order, firm profits would have increased by 5. AO $10,067 BO $11,779 CO $13,781 DO 816,124 EO 18,865 FO 822,072 8 pts X Company's production manager thought that the special order units might have required additional direct material and direct labor costs per unit of 50.83 and 80.22, respectively, and the rental of special equipment for $2,000. The combined effect of these changes would have been to reduce the special order profit by 6. AO $2,072 B 83,004 CO 84,356 DO 86,316 EO 89,157 FO $13,278 8 7 X Company's marketing manager felt that in order for regular sales to continue at 68,700 units this year, the company would have had to reduce the regular selling price this year to $18.56. The result of this price reduction would have been to reduce X Company's profits this year by 7. AO $26,750 BO $30,228 CO $34,158 DO $38,508 EO 843,616 FO $19,286 8p The following income statement is for X Company and its only two products A and B: Total Product A Product B Sales $183,070 $91,480 $91,590 Variable Costs 104,351 51.229 53,122 Contribution margin $78,719 $40,251 $38,468 Fixed costs: Avoidable 56,450 21,610 34,840 Unavoidable 34,530 6,910 27,620 Profit $-12,261 $11,731 8-23,992 Because Product B is showing a loss, X Company is considering dropping it and saving its avoidable fixed costs. If it drops Product B, X Company's new profits will be 8. A 8-8,624 BO S-9,745 CO 8-11,012 DO S-12,443 EO 8-14,061 FO $-15,889

Answer 1

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Question 5			Per unit	Total
Selling price of special order			$           11	$   45,210
Variable Cost:
Cost of goods sold	$440,367/68,700		$       6.41	$   26,345
Selling and admin expense	Not required
Per unit variable cost			$       6.41	$   26,345
Profit of special order				$   18,865	E
Question 6
Less: Additional cost:
Direct Material	4,110*$0.83		$     3,411
Direct Labor	4,110*$0.22		$         904
Rental of Equipment			$     2,000
Profit will reduce by			$     6,316	D
Question 7
Reduction in price will reduce profit by		$     30,228	B
68,700*($19-$18.56)
Question 8
Profit of Product A		$     11,731
Loss of Product B if dropped		$              -
Unavoidable Fixed cost will still incurr		$ (27,620)
New Loss of X Company		$ (15,889)	F