Minor Electric has received a special one-time order for 1,200 light fixtures (units) at $6 per unit. Minor currently produces and sells 6,000 units at $7.00 each. This level represents 75% of its capacity. Production costs for these units are $6.00 per unit, which includes $4.00 variable cost and $2.00 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $500 with a zero salvage value. Management expects no other changes in costs as a result of the additional production. If Minor wishes to earn $700 on the special order, the size of the order would need to be:

Multiple Choice

• 300 units.

• 1,200 units.

• 600 units.

• 200 units.

• 2,400 units.

  Granfield Company has a piece of manufacturing equipment with a book value of $41,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,200. Granfield can purchase a new machine for $122,000 and receive $22,200 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,200 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:

  Multiple Choice

• $23,000 increase

• $76,800 decrease

• $18,800 decrease

• $52,700 increase

• $23,000 decrease