It costs Lannon Fields 28 of variable costs and 12 of allocated fixed costs to

It costs lannon fields 28 of variable costs and 12 of

This preview shows page 14 - 16 out of 67 pages.

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 $24,000Ans: D, LO: 3, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC:Problem Solving, IMA: Business Economics67.A factory is operating at less than 100% capacity. Potential additional business will not useup the remainder of the plant capacity. Given the following list of costs, which one shouldbe ignored in a decision to produce additional units of product?21 - 14
Background image
68.A company is contemplating the acceptance of a special order. The order would not affectregular sales and could be filled without exceeding plant capacity. However, a newstamping machine would have to be purchased in order to stamp the customer’s name onthe product. Which of the following is likely?69.A company contemplating the acceptance of a special order has the following unit costbehavior, based on 10,000 units:Direct materials$ 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
Background image
Image of page 16

You've reached the end of your free preview.

Want to read all 67 pages?

  • Fall '13
  • AICPA FN, AICPA BB

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture