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X Company produces and sells 61,900 units of its regular product each year for $14.00 each. The following cost information relates to this production:

	Total	Per-Unit
Direct materials	$101,516	$1.64
Direct labor	69,947	1.13
Variable overhead	195,604	3.16
Fixed overhead	133,704	2.16
Variable selling	72,423	1.17
Fixed selling	82,327	1.33

A company has offered to buy 4,300 units for $11.72 each. Because the special order product is slightly different than the regular product, X Company will have to rent some equipment at a cost of $16,000.What is profit on the special order?

Assume that if X Company accepts the special order, it will have to lower the selling price on each of its regular units to $13.44. Independent of #1, the effect of lowering the selling price will be to decrease profit by how much?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9956826

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