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?