A)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 40,000 units per month is as follows:

Direct materials	$42.60
Direct labor	$8.10
Variable manufacturing overhead	$1.10
Fixed manufacturing overhead	$17.30
Variable selling & administrative expense	$1.80
Fixed selling & administrative expense	$8.00

The normal selling price of the product is $86.10 per unit. An order has been received from an overseas customer for 2,000 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 $1.20 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the special order would require cutting back on production of 700 units for regular customers. The minimum acceptable price per unit for the special order is closest to:

$86.10

$78.90

$69.10

$63.78

B)Two alternatives, code-named X and Y, are under consideration at Brahler Corporation. Costs associated with the alternatives are listed below.

	Alternative X	Alternative Y
Materials costs	$39,000	$39,000
Processing costs	$44,000	$58,000
Equipment rental	$10,000	$10,000
Occupancy costs	$15,000	$29,000

What is the differential cost of Alternative Y over Alternative X, including all of the relevant costs?

$122,000

$136,000

$108,000

$28,000

C)

The management of Cackowski Corporation has been concerned for some time with the financial performance of its product I11S and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:

Sales	$760,000
Variable expenses	$350,000
Fixed manufacturing expenses	$258,000
Fixed selling and administrative expenses	$198,000

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $185,000 of the fixed manufacturing expenses and $132,000 of the fixed selling and administrative expenses are avoidable if product I11S is discontinued. What would be the effect on the company's overall net operating income if product I11S were dropped?

Overall net operating income would decrease by $46,000.

Overall net operating income would increase by $93,000.

Overall net operating income would increase by $46,000.

Overall net operating income would decrease by $93,000.

D)

The Molis Corporation has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of $15 each. Based on this level of activity, the following unit costs are incurred:

Direct materials	$5.00
Direct labor	$3.00
Variable manufacturing overhead	$0.75
Fixed manufacturing overhead	$1.50
Variable selling expense	$0.25
Fixed administrative expense	$1.00

The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 haks per month. Direct labor is a variable cost. The Molis Corporation has received a special order from a customer who wants to pay a reduced price of $10 per hak. There would be no selling expense in connection with this special order. And, this order would have no effect on the company's other sales. Suppose the special order is for 6,000 haks this month and thus some regular sales would have to be given up. If this offer is accepted by Molis, the company's operating income for the month will:

increase by $6,000

increase by $7,500

increase by $5,000

increase by $1,500

E)Hadley, Inc. makes a line of bathroom accessories. Because of a decline in sales, the company has 10,000 machine hours of idle capacity available each year. This idle capacity could be used by the company to make, rather than buy, one of the components used in its production process. Hadley needs 5,000 units of this component each year. At present, the component is being purchased from an outside supplier at $7.50 per unit. Variable production cost for the component would be $4.10 per unit, and additional supervisory costs would be $18,000 per year. Already existing fixed costs that would be allocated to this part amount to $300,000 per year. The change in the company's overall annual net operating income that would result from making the component, rather than buying it, would be:

$17,000 increase.

$1,000 decrease.

$14,000 decrease.

$5,000 increase.