1. Special Order. Suppose the Behnke Company has approached your company, Hallman Corp., with a special order. Behnke wishes to purchase 65,000 plastic treasure containers for a special promotional campaign and offers to pay you $0.89 per container. Your company has enough capacity to handle the special order and its total production cost is $0.59 per pack, as follows:

Variable costs:
Direct materials	$0.13
Direct labor	$0.09
Variable overhead	$0.12
Fixed overhead	$0.25
Total cost	$0.59

What is the increase or decrease in total operating income from the order if Hallman Corp. accepts the special order. Enter an increase as a positive number and a decrease as a negative number

Discontinuing a product line. Suppose Big Co. is considering discontinuing one of its product lines. Assume that during the past year, the product line's income statement showed the following:

Sales revenue	$7,450,000
Less: Cost of goods sold	$6,500,000
Gross profit	$950,000
Less: operating expenses	$1,600,000
Operating income (loss)	$-650,000

Fixed manufacturing overhead costs account for 10% of the cost of goods, while only 30% of the operating expenses are fixed. Since the product line is just one of Big Co.'s products only $780,000 of the product's fixed expenses (the majority of which is advertising) will be eliminated if the product line is discontinued. If the company decides to discontinue the product line, how much will the company's operating income increase or decrease? Enter an increase as a positive number and a decrease as a negative number.

Answer questions 3 and 4 with the following information Spring Inc. packages musical instrument repair kits for university music programs. Cost data for this packaging process is as follows:

	Annual Cost		Unit Cost
Packaging materials (e.g., boxes and bubble-wrap)		$299,700	$1.905
Packaging direct labor		95,070	$0.604
Indirect materials (e.g., tape, labels)		$69,600	$0.442
Packaging supervision (variable)		54,590	$0.347
Other fixed manufacturing overhead		207,700	$1.320
Total packaging cost		$726,660	$4.620

An outside supplier has offered to do all the packaging for a price of $4 per unit for all packaging-related activities if Spring signs a one-year contract for a minimum of 157,300 units produced each year. Spring could use the factory space now occupied by the packaging process to expand production to another product line. This expansion is expected to generate an additional $175,000 in profit per year. 3. What are the total relevant costs of continuing to package the products internally; that is, which of the annual costs are avoidable if Spring outsources the packaging process?

3. What are the total relevant costs of continuing to package the products internally; that is, which of the annual costs are avoidable if Spring outsources the packaging process?

4. What is the net cost from outsourcing the packaging process after considering the profit from expanding production of another product?