7 and 8

(e) $520,000 Use the following information to answer Question (7) Waters Company produces and sells a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 15,000 units per month is as follows Direct materials Direct labor Variable overhead Fixed overhead Variable selling and administrative costs Fixed selling and administrative costs Total cost per unit $5.50 12.75 2.00 4.00 2.20 3.00 29.45 45%0 The normal selling price is $42 per unit. The company's capacity is 20,000 units per month. Waters recently received a special order from an overseas importer. The order is for 3,000 units at a price of $26 per unit. This order would not disrupt domestic sales or production. The order would not change the company's total fixed costs. ?If the order is accepted, by how much will waters, monthly profits be increased or decreased? (a) $10,350 decrease (b) $23,250 increase (c) $1,650 increase (d) $10,650 increase (8) A business is preparing to invest $2,500,000 for the purchase of a building, which it intends to lease to a third party for $200,000 per year. If an alternative investment is available that yields a 6% annual return, the opportunity cost of the building purchase is: (a) $2,500,000 (b) $200,000 (c) $150,000