1. Litco produces and sells Product 2 with the following revenue and cost information

Sales Revenue per unit		$38
Cost per unit:
Direct Materials	$7
Direct Labor	$2
V. Manu O/H	$3
Fixed Manu O/H	$6
Sales Commissions	$3
Packaging	$1
Total Cost Per Unit		$22
Net Income Per Unit		$16

A new customer in a new sales region offers to buy 1,000 units for $18 per unit.

If this offer is accepted, Litco will pay no sales commissions but packaging costs will increase from $1 to $2 per unit.

Assuming Litco has excess capacity and will not lose any of its current customers, should Litco accept or reject this offer?

	Current Printer	New Model
Original Purchase Cost	$12,500	$24,000
Accumulated Depreciation	$8,900	------
Estimated Operating Costs (Annually)	$11,000	$5,200
Useful Life	6 years	6 years

If sold now, the current printer will have a salvage value of $2,900. If operated for the remainder of its useful life, the current printer will have no salvage. The new printer is expected to have zero salvage after five years.

Should the company retain or replace the printer? (Indicate how net income will differ)

3. It costs Bluff Company $18.20 of variable costs and $7.80 of fixed costs to produce its product that sells for $39. Oz Company, a foreign buyer, offers to purchase 3,000 units at $23.40 each. If this special offer is accepted and produced with unused capacity, net income will:

1. Decrease $7,800
2. Increase $7,800
3. Increase $15,600
4. Increase $11,700