6.) Derrick Enterprises (DE) makes surge protectors that are used to protect equipment in clectrical storm, The cote associated with making, a surge protector are shown below. Unit-Level Materials 7.00 Labor 12.00 Overhead 3.00 Batch-Level Set-up 4,000 per batch Product-Level Engineering 50,000 per year Advertising 120,000 per year

Derrick normally makes and sells 10,000 surge protector per year which are made in batches containing 1,000 units, Derrick has an opportunity to sell 1,000 protectors at a special order price of $24 per unit. Ignoring qualitative factors, Derrick should a. accept the offer because it would increase profitability by $2,000, b, reject the offer because it would decrease profitability by $2,000. C. accept the offer because it would increase revenue by $240,000. d. reject the offer because it would decrease profitability $4,000.

The following information is available for the next three (3) questions: A production cost summary for Davidson Company follows: Unit-level direct material $5.00/unit Unit-level direct labor 2.00/unit Unit-level overhead 6.00/unit Product-level overhead 4.00/unit Total cost per unit $17.00 Fixed facility-level selling costs are $600,000 per year and unit-level selling costs are $2. The unit-level selling costs consist primarily of shipping and packaging costs. Production capacity is 400,000 units, but Davidson only expects to produce (and sell) 250,000 units next year. The normal selling price of the product is $30 per unit. A merchant from Venice, Italy has made an offer to purchase 50,000 units at $24 each.

7. The relevant incremental cost per unit associated with the special order is a. $15. b. $13. C. $9, d. $11 8. If Davidson accepts the special offer, profitability will a. increase by $450,000. b. decrease by $450,000. C. increase by $550,000. d. decrease by $550,000

9. Select the true statement from the following choices. a. the facility-level selling costs are relevant to the special offer decision. b. the product-level production costs are relevant to the special offer decision. c. the unit-level selling costs are not relevant to the special offer decision. d. all of the statements are false.