Factor Company estimates that producing a unit of product would require $7.20 per unit of direct materials and $23.20 per unit of direct labor. Factor Company normally applies overhead using a predetermined overhead rate of 150% of direct labor cost. Factor Company estimates incremental overhead of $14.40 per unit of product. An outside supplier offers to provide Factor Company with all the units it needs at a price of $42.80 per unit. Factor Company should choose to:

Multiple Choice

• Buy since the relevant cost to make it is $52.00.

• Make since the relevant cost to make it is $44.80.

• Buy since the relevant cost to make it is $44.80.

• Make since the relevant cost to make it is $30.40.

• Buy since the relevant cost to make it is $30.40.

Lattimer Company had the following results of operations for the past year:

Contribution margin income statement	Per Unit	Annual Total
Sales (15,000 units)	$ 12.00	$ 180,000
Variable costs
Direct materials	1.50	22,500
Direct labor	4.00	60,000
Overhead	1.00	15,000
Contribution margin	5.50	82,500
Fixed costs
Fixed overhead	1.00	15,000
Fixed selling and administrative expenses	1.40	21,000
Income	$ 3.10	$ 46,500

A foreign company offers to buy 5,000 units at $7.50 per unit. In addition to variable costs, selling these units would add a $0.25 selling expense for export fees. Lattimers annual production capacity is 25,000 units. If Lattimer accepts this additional business, the special order will yield a:

Multiple Choice

• $2,000 loss.

• $8,250 loss.

• $3,750 profit.

• $3,250 loss.

• $5,000 profit.