1. Tyler Company has been approached by a new customer with an offer to purchase 8,000 units of its product KR200 at a price of $10 each. The existing sales would not be affected by this special order. Tyler normally produces 40,000 units but plans to produce and sell 30,000 in the coming year. The normal sales price is $16 per unit. Unit cost information is as follows:

Direct materials	$4.00
Direct labor	$3.00
Variable overhead	$2.00
Fixed overhead	$3.25
Total	$11.50

If Tyler accepts the order, no fixed manufacturing activities will be affected because there is sufficient excess capacity.

Required:

A. By how much will profit increase or decrease if the order is accepted?

B. Should Tyler accept the special order?

2.

Top Notch Music Inc. produces car stereos. During the year Top Notch Music produced 7,000 stereos. Materials and labor standards for producing these units are as follows:

Direct materials (1 electronic component kit @ $200)	200
Direct labor (10 hours @ $15)	150

Required:

A. Compute the direct material price and usage variances. Electronic kits purchased and used were 6,800 kits at an actual price of $180 per kit.

B. Compute the direct labor rate and efficiency variances. 68,000 labor hours were used and the actual labor rate was $13 per hour.