Reggie Corporation manufactures a single product with the following unit costs for 1,000 units: $\begin{array}{lr} \text { Direct materrals } & \$ 2,400 \\ \text { Direct labour } & 960 \\ \text { Factory overhead ( } 30 \% \text { variable) } & 1,800 \\ \text { Selling expenses ( } 50 \% \text { variable) } & 900 \\ \text { Administrative expenses (10\% variable) } &840\\ \text { Total per unit }& \$ 6,900 \end{array}$ Recently,a company approached Reggie Corporation about buying 100 units for $5,100 each.Currently,the models are sold to dealers for $7,800.Reggie Corporation's capacity is sufficient to produce the extra 100 units.No additional selling expenses would be incurred on the special order. What is the profit earned by Reggie Corporation on the original 1,000 units?

A) $900,000 B) $2,640,000 C) $6,900,000 D) $8,400,000 A) $900,000 B) $2,640,000 C) $6,900,000 D) $8,400,000

Walton Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: $\begin{array}{llr} \text { Direct materials} &\$12\\ \text { Direct labour } &36\\ \text { Variable manufacturing overhead } &18\\ \text { Fixed manufacturing overhead } &24\\ \end{array}$ The company has the capacity to produce 90,000 units.The product regularly sells for $120. -A wholesaler has offered to pay $110 a unit for 7,500 units. If the special order is accepted,what would be the effect on operating income?

A) $75,000 decrease B) $249,000 increase C) $429,000 increase D) $495,000 increase A) $75,000 decrease B) $249,000 increase C) $429,000 increase D) $495,000 increase

Manning Company uses a joint process to produce products W, X, Y, and Z. Each product may be sold at its split-off point or processed further. Additional processing costs of specific products are entirely variable. Joint processing costs for a single batch of joint products are $120,000. Other relevant data are as follows: $\begin{array}{cccc} & \text { Sales Value } & \text { Additional } & \text { Sales Value of } \\ \text { Product } & \text { at Split-Off } & \text { Processing Costs } & \text { Final Product }\\ \text { W } & \$ 40,000 & \$ 60,000 &\$ 80,000 \\ \mathrm{X} & \$ 12,000 & \$ 4,000 & \$20,000 \\ \mathrm{Y} & \$ 20,000 & \$ 32,000 & \$ 120,000 \\ \text { Z } & \$ 28,000 & \$ 20,000 & \$32,000 \\ & \$ 100,000 & \$1 16,000 & \$ 252,000 \\ \end{array}$ -Refer to the figure.Which products should Manning process further?

A) W,X,Y and Z B) W,X,and Y C) X and Y D) X only A) W,X,Y and Z B) W,X,and Y C) X and Y D) X only

Information about three joint products follows: $\begin{array}{lccc} &\underline{A}&\underline{B} &\underline{C}\\ \text { Anticipated production } & 5,000 \mathrm{~kg} & 1,000 \mathrm{~kg} & 2,000 \mathrm{~kg} \\ \begin{array}{l} \text { Selling price/kg at split-off } \\ \text { Additional processing costs/ } \mathrm{kg} \end{array} & \$ 10 & \$ 30 & \$ 16 \\ \begin{array}{l} \text { after split-off (all variable) } \end{array}& \$ 6 & \$ 12 & \$ 24 \\ \begin{array}{l} \text { Selling price/kg after further } \\ \text { processing } \end{array} &\$20&\$40&\$50 \\ \end{array}$ The cost of the joint process is $140,000. -Refer to the figure.Assuming all of the sell-now or process-further decisions were correctly made,what will be the firm's income?

A) $596,000 B) $610,000 C) $654,000 D) $736,000 A) $596,000 B) $610,000 C) $654,000 D) $736,000

Gundy Company manufactures a product with the following costs per unit at the expected production of 30,000 units: $\begin{array}{llr} \text { Direct materials} &\$4\\ \text { Direct labour } &12\\ \text { Variable manufacturing overhead } &6\\ \text { Fixed manufacturing overhead } &8\\ \end{array}$ The company has the capacity to produce 40,000 units.The product regularly sells for $40.A wholesaler has offered to pay $32 a unit for 2,000 units. If the firm is at capacity and the special order is accepted,what would be the effect on operating income?

A) $0 B) $4,000 increase C) $16,000 decrease D) $20,000 increase A) $0 B) $4,000 increase C) $16,000 decrease D) $20,000 increase

Foster Industries manufactures 20,000 components per year.The manufacturing cost of the components was determined as follows: $\begin{array}{lr} \text { Direct materials } & \$ 150,000 \\ \text { Direct labour } & 240,000 \\ \text { Variable manufacturing overhead } & 90,000 \\ \text { Fixed manufacturing overhead } & 120,000 \\ \text { Total } & \$ 600,000 \end{array}$ An outside supplier has offered to sell the component for $25.50. Foster Industries can rent its unused manufacturing facilities for $45,000 if it purchases the component from the outside supplier. What is the effect on income if Foster purchases the component from the outside supplier?

A) $15,000 increase B) $45,000 increase C) $75,000 decrease D) $105,000 increase A) $15,000 increase B) $45,000 increase C) $75,000 decrease D) $105,000 increase