Sorrento Companys plant is operating at less than full capacity The company

Sorrento companys plant is operating at less than

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60.Sorrento Company’s plant is operating at less than full capacity. The company justreceived a one-time opportunity to accept an order at a special price below its usual price.The special price exceeds its variable costs. Therefore, which statement is true?a.Fixed costs are relevant.b.The order will likely be accepted.c.The order will likely be rejected.d.Sorrento should expand its plant capacity before accepting the order.61.Canosta, Inc. determined that it must expand its capacity to accept a special order. Whichsituation is likely?62.A company is within plant capacity. It is contemplating whether a special order should beaccepted. The order will not impact regular sales. If the company accepts the specialorder, what will occur?63.Argus Company anticipates that other sales will be affected by the acceptance of aspecial order. What should the company do?64.It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce anindustrial trash can that sells for $30. A buyer in Mexico offers to purchase 3,000 units at$18 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 $6,000b.Increase $6,000c.Increase $54,000d.Increase $12,000Incremental revenue (3,000 × $18)$54,000Incremental variable costs ($14 × 3,000)(42,000)Incremental profit if special order is accepted$ 12,00065.It costs Fortune Company $10 of variable and $4 of fixed costs to produce one bathroomscale, which normally sells for $28. A foreign wholesaler offers to purchase 1,000 scalesat $12 each. Fortune would incur special shipping costs of $1 per scale if the order wereaccepted. Fortune has sufficient unused capacity to produce the 1,000 scales. If thespecial order is accepted, what will be the effect on net income?7-10
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Incremental Analysis7-11Incremental revenue (1,000 × $12)$12,000Incremental variable costs (1,000 × 10) (10,000)Incremental shipping costs ($1 × 1,000)(1,000)Incremental profit if special order is accepted$ 1,000
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