1.

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. Assume the Mold Division of SPKY Corporation had the following results last year (in thousands). Management's target rate of return is 10% and the weighted average cost of capital is 7%. Its effective tax rate is 30%.

   Sales	$6,000,000
   Operating income	900,000
   Total assets	3,000,000
   Current liabilities	750,000

   What is SPKYCorporation Mold division's asset turnover?

   	a.	2.0
   	b.	3.3
   	c.	2.3
   	d.	5

3. A company has received a special order from a customer to make 5,000 units of a customized product. The direct materials cost per unit of the customized product is $15, the direct labour cost per unit is $5, and the manufacturing overhead per unit is $18, including $6 of variable manufacturing overhead. If the company has sufficient available manufacturing capacity, what is the minimum price that can be accepted for the special order?

   a		$24
   b		$26
   c		$32
   d		$38