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The budgeted sales and costs for Desmond Co this year are as follows:
Sales 34 p.u $68000
Variable costs 18 p.u $36000
Fixed costs 9 p.u $18000
However, Desmond Co has just won a new contract to be fulfilled in the final month of this year when spare capacity exists. This will comprise making and selling 200 units at the same selling price and variable cost per unit. This contract is not reflected in the predicted results for the year.
what will be the budgeted sales and profit of desmond CO for the year including this contract?
My answer is Sales will be &74800, Profits will be $17,200.
because 200*34 = 6800 so Sales 68000+6800 = 74800
and then 200*18 = 3600 for Variable cost and it will be 36000+3600 = 39600
profit then will be 17200 because 74800-39600-18000.
Im just not sure about the fixed cost bc its says in the contract that 200 units is only for the selling price and vc per unit. so my question is do i still multiply the fixed cost p.u to the 200units?
The fixed costs will stay at 18,000 by definition – they will not change because of making extra units.