10. A company has idle (excess) production capacity and is considering a one-time special order to sell 40,000 watches at $40 each. The regular selling price of this model to existing customers is $60 each. The following are the regular per unit production costs of this model: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead The company should: $20 $10 $5 $8 A. reject the special order because incremental costs will exceed incremental revenue by $120,000 B. accept the special order because incremental revenue will exceed incremental costs by 200,000 C. accept the special order because it will generate net incremental revenue of $1,400,000 D. reject the special order because total fixed costs will increase by $320,000 11. The major factor in deciding whether to eliminate a product line will depend on the impact on: A. the change in total variable costs compared to total overhead costs B. total revenue C. total cost D. the change in total company costs compared to the change in total company revenues 12. Activity Based Costing normally results in: A. a decrease in total overhead costs B. an increase in total overhead costs C. many allocation rates instead of one company-wide rate D. a cost-effective method of allocating variable manufacturing overhead 13. An example of an activity based cost driver (allocation base) is: A. number of machine hours used B. quality costs for products C. inspection costs in a factory D. utility costs in a factory 14. An appropriate cost driver for the cost of processing purchase orders is the: A. cost of purchase orders B. cost of materials purchased number of purchase orders D. type of materials purchased 4