Perteet Corporation's relevant range of activity is 6300 units to 12,500 units. When it produces and sells 9400 units, its average costs per unit are as follows: AverageCost per UnitDirect materials$7.20? Direct labor$3.65? Variable manufacturing overhead$1.70? Fixed manufacturing overhead$2.90? Fixed selling expense$0.65? Fixed administrative expense$0.35? Sales commissions$0.45? Variable administrative expense$0.50? If 6800 units are produced, the total amount of manufacturing overhead cost is closest to:
A. $28,520
B. $49,890
C. $22,010
D. $38,820
Answer: D
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Minor Electric has received a special one-time order for 1,500 light fixtures (units) at $5 per unit. Minor currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. Should the company accept the special order?
A. Yes, because net income would increase by $7,500. B. No, because net income would decrease by $5,500. C. No, because net income would decrease by $2,000. D. Yes, because net income would increase by $2,000. E. No, because net income would decrease by $1,500.