3. Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 12,000 cases of sauce each year but is currently only manufacturing and selling 10,800. The following costs relate to annual operations at 10,800 cases:

	Total Cost
Variable manufacturing cost	$129,600
Fixed manufacturing cost	$49,000
Variable selling and administrative cost	$32,400
Fixed selling and administrative cost	$31,000

Gwinnett normally sells its sauce for $35 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,200 cases of sauce but only if they can get the sauce for $14 per case. This special order would not affect regular sales or total fixed costs or variable costs per unit. If this special order is accepted, Gwinnett's profits for the year will:

increase by $600

decrease by $1,200

decrease by $10,800

decrease by $7,200

4.Nesmith Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below:

	Alternative A	Alternative B
Materials costs	$43,000	$57,000
Processing costs	$49,000	$49,000
Equipment rental	$11,600	$28,800
Occupancy costs	$19,800	$30,600

What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?

$42,000

$165,400

$123,400

$149,800

5. Tawstir Corporation has 500 obsolete personal computers that are carried in inventory at a total cost of $720,000. If these computers are upgraded at a total cost of $210,000, they can be sold for a total of $270,000. As an alternative, the computers can be sold in their present condition for $50,000.

What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

$220,000 advantage

$60,000 advantage

$10,000 advantage

$770,000 disadvantage

7. Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 59,000 units per month is as follows:

Direct materials	$52.10
Direct labor	$10.00
Variable manufacturing overhead	$3.00
Fixed manufacturing overhead	$21.10
Variable selling & administrative expense	$5.60
Fixed selling & administrative expense	$27

The normal selling price of the product is $124.10 per unit.

An order has been received from an overseas customer for 3,900 units to be delivered this month at a special discounted price. This order would have no effect on the company's normal sales and would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $3.10 less per unit on this order than on normal sales.

Direct labor is a variable cost in this company.

Suppose there is ample idle capacity to produce the units required by the overseas customer and the special discounted price on the special order is $95.40 per unit. By how much would this special order increase (decrease) the company's net operating income for the month?

$(97,000)

$26,130

$108,420

$(91,260)