Question 6 Saxon Company produces a single product X. Operating at capacity, the company can produce 50,000 units of per year, and costs associated with this level of capacity are as follows: Direct Materials Direct Labor Variable Overhead Fixed Overhead Variable selling expenses Fixed selling expenses Total cost per unit Unit $12 Total $600,000 3 150,000 1 50,000 5 250,000 2 100,000 4 200,000 27 $1,350,000 The selling price of X is $32 each. A government agency would like to make a one-time-only purchase of 10,000 units of X. The agency would reimburse Saxon Company for all costs of production (i.e., variable and fixed manufacturing costs) associated with its order and pay $4 per units additionally. There would be no variable selling expenses associated with this offer. 1. 2. Assume that Saxon Company currently produces and sells 40,000 units of X. What is the impact of the government agency's special order on the company's profit? Assume that current production and sales of Saxon Company is 50,000 units of X, and hence, if the special offer is accepted, the company has to give up 10,000 units of its regular sales. What is the impact of the government agency's special order on the company's profit?