What would prophet have been on the special order

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Reference no: EM132920671

Question - Near the end of 2020, X company had produced and sold 69,800 units of its only product. Costs for these units were:

 

Total

Per-Unit

Direct materials

$139,600

$2.00

Direct labor

69,800

1.00

Variable overhead

223,360

3.20

Fixed overhead

125,640

1.80

Variable selling and administration

88,646

1.27

Fixed selling and administration

97,720

1.40

Total

$744,766

$10.67

A company offered to buy 4260 units for $13.86 each. X company had the capacity to produce the additional 4260 units, but because the special-order product was slightly different than the regular product, direct materials costs were expected to increase to $2.20 per unit and some special equipment would have to be rented for a total of $13,000.

Required -

A) What would Prophet have been on the special order?

B) The price of its regular product is normally set at 30% above total manufacturing cost per unit, but it would have to reduce it to $9.93 per unit. The effect of lowering the selling price would have been to decrease company profits by?

Reference no: EM132920671

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