22. Refer to Exhibit 7-1. Which of the following amounts is a sunk cost in this problem?

a. $1,060 per unit

b. $40 per unit

c. $600 per unit

d. $400 per unit

e. None of the answer choices is correct.

Exhibit 7-2

Jake Company is considering a special order for 5,000 units at a price of $60 per unit. Jake's product normally sells for $84 per unit and has variable manufacturing costs of $45 per unit and variable selling costs of $9 per unit. Fixed manufacturing costs are $150,000 and fixed selling and administrative costs are $300,000. Jake has capacity to produce 30,000 units and is currently producing 20,000 units. If the order is accepted, , Jake will incur legal fees of $7,500 in connection with the order, but there will be no variable selling costs on the special order.

23. Refer to Exhibit 7-2. What are the differential costs associated with the special order?

a. $232,500

b. $67,500

c. $127,500

d. $322,500

e. None of the answer choices is correct.

24. Refer to Exhibit 7-2. What amount of additional profit or loss will be incurred if the order is accepted?

a. $300,000

b. $67,500

c. ($127,500)

d. ($22,500)

e. None of the answer choices is correct.

Exhibit 7-3

Cap Incorporated currently manufactures hats. Management is interested in outsourcing production to a reputable manufacturing company that can supply the hats for $5 per unit. Cap produces 20,000 hats each year. Variable production costs are $2 and annual fixed costs are $75,000. If production is outsourced, all variable costs and 60 percent of annual fixed costs will be eliminated.

25. Refer to Exhibit 7-3. If the hats are made internally, what are the total production costs?

a. $25,000

b. $100,000

c. $115,000

d. $175,000

e. None of the answer choices is correct.