Question : 61.              Martin Company incurred the following costs for 70,000 units: Variable : 1311770

 

 

61.              Martin Company incurred the following costs for 70,000 units:

Variable costs$420,000

Fixed costs  392,000

 

Martin has received a special order from a foreign company for 3,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $6,300 for shipping.

 

If Martin wants to break even on the order, what should the unit sales price be?

a.$6.00

b.$8.10

c.$11.60

d.$13.70

 

 

62.              Martin Company incurred the following costs for 70,000 units:

Variable costs$420,000

Fixed costs  392,000

 

Martin has received a special order from a foreign company for 3,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $6,300 for shipping.

 

If Martin wants to earn $6,000 on the order, what should the unit price be?

a.$9.70

b.$15.70

c.$8.00

d.$10.10

 

 

63.              Canosta, Inc. determined that it must expand its capacity to accept a special order. Which situation is likely?

a.Unit variable costs will increase.

b.Fixed costs will not be relevant.

c.Both variable and fixed costs will be relevant.

d.The company should accept the order.

 

 

64.              A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur?

a.Incremental costs will not be affected.

b.Net income will increase if the special sales price per unit exceeds the unit variable costs.

c.There are no incremental revenues.

d.Both fixed and variable costs will increase.

 

 

65.              Argus Company anticipates that other sales will be affected by the acceptance of a special order. What should the company do?

a.Reject the order.

b.Consider the opportunity cost of lost sales in the incremental analysis.

c.Accept the order.

d.Accept the order if the plant is below capacity.

 

 

66.              It costs Lannon Fields $28 of variable costs and $12 of allocated fixed costs to produce an industrial trash can that sells for $60. A buyer in Mexico offers to purchase 3,000 units at $36 each. Lannon Fields has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?

a.Decrease $12,000

b.Increase $12,000

c.Increase $108,000

d.Increase $24,000

 

 

67.              A factory is operating at less than 100% capacity. Potential additional business will not use up the remainder of the plant capacity. Given the following list of costs, which one should be ignored in a decision to produce additional units of product?

a.Variable selling expenses

b.Fixed factory overhead

c.Direct labor

d.Contribution margin of additional units

 

 

68.              A company is contemplating the acceptance of a special order. The order would not affect regular sales and could be filled without exceeding plant capacity. However, a new stamping machine would have to be purchased in order to stamp the customer’s name on the product. Which of the following is likely?

a.Total variable costs will be irrelevant.

b.Only variable costs will be relevant.

c.Only fixed costs will be relevant.

d.Both variable and fixed costs will be relevant.

 

 

69.              A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10,000 units:

Direct materials$  4

Direct labor10

Variable overhead8

Fixed overhead6

A foreign company wants to purchase 2,000 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $4,000 in order to stamp the foreign company’s name on the product. The incremental income (loss) from accepting the order is

a.$6,000.

b.$2,000.

c.$(6,000).

d.$(2,000).

 

 

70.              A company’s unit costs based on 100,000 units are:

Variable costs$75

Fixed costs30

The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to fulfill the order, 3,000 units of regular sales would have to be foregone.

 

The opportunity cost associated with this order is

a.$225,000.

b.$495,000.

c.$270,000.

d.$405,000.