1.

SPKY has the capacity to produce 15,000 units per month while incurring the following costs:

Direct materials	$3.00
Direct labour	$4.00
Variable manufacturing overhead	$1.50
Variable selling expense	$0.50
Fixed manufacturing overhead	$1.00

A special order has been received from a customer who wants to pay a reduced price of $11 per unit. There would be no selling expense in connection with this order and no other expenses or sales will be affected. If the order is for 5,000 units, the impact on operating income would be a(n):

	a.	increase in operating income of $7,500.
	b.	increase in operating income of $12,500.
	c.	decrease in operating income of $12,500.
	d.	decrease in operating income of $7,500.

2.

If the sales price is $15, the variable cost is $5, the fixed cost is $11,000, and 11,000 units are produced, how many units need to be sold if the desired profit is $5,000?

a.		11,500
b.		8,500
c.		1,600
d.		500