66.It costs Lannon Fields $28 of variable costs and $12 of allocated fixed costs to produce anindustrial 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 $12,000b.Increase $12,000c.Increase $108,000d.Increase $24,000Ans: D, LO: 3, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC:Problem Solving, IMA: Business Economics67.A factory is operating at less than 100% capacity. Potential additional business will not useup the remainder of the plant capacity. Given the following list of costs, which one shouldbe ignored in a decision to produce additional units of product?21 - 14
68.A company is contemplating the acceptance of a special order. The order would not affectregular sales and could be filled without exceeding plant capacity. However, a newstamping machine would have to be purchased in order to stamp the customer’s name onthe product. Which of the following is likely?69.A company contemplating the acceptance of a special order has the following unit costbehavior, based on 10,000 units:Direct materials$ 4Direct labor10Variable overhead8Fixed overhead6A foreign company wants to purchase 2,000 units at a special unit price of $25. Thenormal price per unit is $40. In addition, a special stamping machine will have to bepurchased for $4,000 in order to stamp the foreign company’s name on the product. Theincremental income (loss) from accepting the order is
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