A.)

Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 18,000 cases of sauce each year but is currently only manufacturing and selling 16,500. The following costs relate to annual operations at 16,500 cases:

	Total Cost
Variable manufacturing cost	$231,000
Fixed manufacturing cost	$59,000
Variable selling and administrative cost	$33,000
Fixed selling and administrative cost	$41,000

Gwinnett normally sells its sauce for $35 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,500 cases of sauce but only if they can get the sauce for $15 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 $500

decrease by $1,500

decrease by $16,500

decrease by $13,500

B.)

Farnsworth Television makes and sells portable television sets. Each television regularly sells for $210. The following cost data per television are based on a full capacity of 12,500 televisions produced each period:

Direct materials	$70
Direct labor	$50
Manufacturing overhead (70% variable, 30% unavoidable fixed)	$40

A special order has been received by Farnsworth for a sale of 2,000 televisions to an overseas customer. The only selling costs that would be incurred on this order would be $11 per television for shipping. Farnsworth is now selling 7,000 televisions through regular distributors each period. What should be the minimum selling price per television in negotiating a price for this special order?

$210

$148

$160

$159

C.)

Wiacek Corporation has received a request for a special order of 4,500 units of product F65 for $27.10 each. Product F65's unit product cost is $26.80, determined as follows:

Direct materials	$2.65
Direct labor	7.95
Variable manufacturing overhead	7.05
Fixed manufacturing overhead	9.15
Unit product cost	$26.80

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product F65 that would increase the variable costs by $3.50 per unit and that would require an investment of $24,000 in special molds that would have no salvage value.

This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by:

$(38,400)

$2,775

$1,350

$(61,650)