Falcon Co. Produces a single product. Its normal selling price is $30 pa unit. The variable costs are $19 unit. Fixed costs are $25,000 a normal production run of 5,000 units per month. Falcon received request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of $20.00 per unit. Falcon Co. has the capacity to handle the special order and, for this order, a variable selling cost of $1 per unit would be eliminated.

1. If the order is accepted, what would be the impact on net income?

a. Darns. of $750

b. Decrease of $4,500

c. Increase of $3,000

d. Increase of $1,500

2. Should the special order be accepted?

a. Cannot determine from die data given

b. Yes

c. No

d. There would be no difference in accepting or rejecting the special order.

3. The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called:

a. I. absorption cost analysis.

b. variable cost analysis.

c. capital investment analysis.

d. Cost-volume-profit analysis.

4. Which of the following are present value methods of analyzing capital investment proposals?

a. Internal rate of return and average rate of return.

b. Average rate of return and net present value.

c. Net present value and internal rate of return.

d. Net present value and payback.