Question One:

(X) Company produces 10,400 units of product (A) at a cost of $560 each. Variable cost per unit is $380 and fixed cost per unit is $ 180.

(Y) Company offers to supply 10,400 units of product (A) for $520.

If Company (X) buys from (Y) it will be able to save $20 per unit in fixed costs but continue to incur the remaining $160 per unit.

Use calculations to make decision whether company (X) accepts or reject the offer.

Question Two :

Amman Company manufactures product (B) and sells at 24 JDs each unit. Variable manufacturing cost is 10 JD per unit and allocated fixed manufacturing cost is 1.5 JD per unit.

It has enough ideal capacity available to accept a one-time-only special order of 5000 units at 12.5 JD per unit.

What would the effect on operating income if the special order could be accepted without affecting normal sales?

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