By how much firm profits would have increased

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Question: During the year, Z Company sold 61,900 units of one of its products for $17.00 each. The following cost functions are for this regular production and sales levels:

Cost of goods sold: $6.69X + $123,181

Selling and administrative expenses: $2.86X + $84,184

Variable selling and administrative expenses include sales commissions equal to 4% of sales. At the end of the year, a company offered to buy 4,190 units but was only willing to pay $12.00 each. Z Company had the capacity to produce the 4,190 units.

If Z Company had accepted the special order, firm profits would have increased by how much?

Now assume that there would not have been sales commissions for the special order. If Z Company had accepted the special order, firm profits would have increased by how much?

Reference no: EM132762851

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