Question - At the end of the year, a company offered to buy 4,450 units of a product from X Company for a special price of $12.00 each Instead of the company's regular price of $17.00 each. The following information relates to the 65,000 units of the product that X Company made and sold to its regular customers during the year:
|
|
Per-Unit
|
Total
|
|
Cost of goods sold
|
$8.80
|
$572,000
|
|
Period costs
|
2.80
|
182,000
|
|
Total
|
$11.60
|
$754,000
|
Fixed cost of goods sold for the year were $133,250, and fixed period costs were $91,650. Variable period costs include selling commissions equal to 2% of revenue.
Required -
1. Profit on the special order is.
2. Assume the following two changes for the special order: 1) variable cost of goods sold will decrease by $0.90 per unit, and 2) there will be no selling commissions. What will be the effect of these two changes on the special order profit?