Ovation Company has a single product called a Bit. The company normally produces and sells 86,000 Bits each year at a selling price of $48 per unit. The companys unit costs at this level of activity are given below:

Direct materials	$	8.50
Direct labour		12.00
Variable manufacturing overhead		3.80
Fixed manufacturing overhead		8.00	($688,000 total)
Variable selling expenses		3.70
Fixed selling expenses		4.50	($387,000 total)
Total cost per unit	$	40.50

A number of questions relating to the production and sale of Bits follow. Each question is independent.

Required:
1.	Assume that Ovation Company has sufficient capacity to produce 116,100 Bits each year without any increase in fixed manufacturing overhead costs. The company could increase its sales by 35% above the present 86,000 units each year if it was willing to increase the fixed selling expenses by $130,000.

a.	Calculate the incremental net operating income(Negative amount should be indicated with a minus sign.Do not round intermediate calculations.Omit the "$" sign in your response.)

Incremental net operating income

$

b.	Would the increased fixed selling expenses be justified?
	Yes No

2.

Assume again that Ovation Company has sufficient capacity to produce 116,100 Bits each year. A customer in a foreign market wants to purchase 30,100 Bits. Import duties on the Bits would be $1.20 per unit, and costs for permits and licences would be $21,070. The only selling costs that would be associated with the order would be $1.50 per unit shipping cost. Compute the per unit break-even price on this order.(Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Break-even price per unit

$

3.

The company has 600 Bits on hand that have some irregularities and are therefore considered to be seconds. Due to the irregularities, it will be impossible to sell these units at the normal price through regular distribution channels. What unit cost figure is relevant for setting a minimum selling price?(Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Relevant unit cost

$

4.

Due to a strike in its suppliers plant, Ovation Company is unable to purchase more material for the production of Bits. The strike is expected to last for two months. Ovation Company has enough material on hand to operate at 25% of normal levels for the two-monthperiod. As an alternative, Ovation could close its plant down entirely for the twomonths. If the plant was closed, fixed manufacturing overhead costs would continue at35% during the two-month period and the fixed selling expenses would continue at two-thirds of their normal level. What would be the impact on profits of closing the plant for the two-month period?(Input the amount as apositive value. Round your intermediate calculations of units produced and sold to the nearest whole number. Do not round your other intermediate calculations. Omit the "$" sign in your response.)

Net(Click to select)advantagedisadvantageof closing the plant

$

5.

An outside manufacturer has offered to produce Bits and ship them directly to Ovations customers. If Ovation Company accepts this offer, the facilities that it uses to produce Bits would be idle; however, fixed manufacturing overhead costs would continue at 30%. Because the outside manufacturer would pay for all shipping costs, the variable selling expenses would be reduced by 60%. Compute the unit cost that is relevant for comparison to the price quoted by the outside manufacturer.(Do not round intermediate calculations.Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Total avoidable unit cost

$