Noma Company has reported the following unit costs of producing and selling the product C50 at a volume of 10,000 units per month (as shown in the below table); this volume represents the companys capacity.

Noma Company is currently selling 9,000 units per month. Besides, the company has received a special order from a customer in a foreign market for 1,000 units of the product C50; this order will not affect the regular sales. The fixed manufacturing costs as well as fixed selling and administrative expenses are constant within the relevant range which is between 8,000 units and 10,000 units per month. Direct labor is a variable cost, and variable selling and administrative expenses will be incurred for this order as all other sales.

17. If Noma Company sets the price of each of the 1,000 units of the special order at $7.50 per unit, what will be the impact of accepting this special order on the companys overall net operating income? *

The overall net operating income will decrease by $1,250

The overall net operating income will increase by $500

The overall net operating income will increase by $1,750

The overall net operating income will increase by $7,500

None of the above

18. If Noma Company has 50 defective units from product C50 that are left over from last period. Thus, due to the small defects in those units, they are to be sold at a reduced price as scrap. Assuming that this will not affect the companys other sales, what is the cost that can be considered as relevant in setting a minimum price for selling each of those defective units? *

$1.25 per unit

$2.00 per unit

$7.00 per unit

$7.50 per unit

None of the above

Item Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling and Administrative Expenses Fixed Selling and Administrative Expenses Amount $3.00 per unit $2.25 per unit $0.50 per unit $1.00 per unit $1.25 per unit $0.75 per unit