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Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of $750,000 and a fixed cost of $450,000. Based on Relay's predictions for next year, 240,000 batons will be sold at the regular price of $5.00 each. In addition, a special order was placed for 60,000 batons to be sold at a 40% discount off the regular price. Total fixed costs would be unaffected by this order. By what amount would the company's operating income be increased or decreased as a result of the special order? 10 Multiple Choice points eBook O $30,000 increase. Print O $36,000 increase. O $60,000 decrease. O $180,000 increase.2 Wagner Company sells Product A for $21 per unit. Wagner's unit product cost based on the full capacity of 200,000 units is as follows: Direct Materials Direct Labour 10 Manufacturing Overhead point Unit Product Cost $15 A special order offering to buy 20,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be $3 per unit for shipping. Wagner has sufficient idle capacity to manufacture the additional units. Two-thirds of the manufacturing overhead is fixed and would not be affected by this order. eBook Assume that direct labour is an avoidable cost in this decision. In negotiating a price for the special order, what should be the minimum acceptable selling price per unit? Print Multiple Choice O $14 O $15 O $16. O $183 Which of the following is NOT an effective way of dealing with a production constraint (i.e., bottleneck)? Multiple Choice 10 points O Reduce the number of defective units produced at the bottleneck. eBook Print O Pay overtime to workers assigned to the bottleneck. O Pay overtime to workers assigned to workstations located after the bottleneck in the production process. O Subcontract work that would otherwise require use of the bottleneck.4 Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs. Of the fixed costs, $21,000 cannot be eliminated. What would be the effect on the operating income of Manor Company of discontinuing this department? Multiple Choice 10 point O An increase of $4,000. BOOK Print O A decrease of $4,000. O An increase of $25,000. O A decrease of $25,000.5 Consider the following statements: I. A vertically integrated firm is more dependent on its suppliers than a firm that is NOT vertically integrated. Il. Many firms feel they can control quality better by making their own parts. Ill. A vertically integrated firm realizes profits from the parts it is "making" instead of "buying" as well as profits from its regular operations. 10 points Which of the above statements represent advantages to a firm that is vertically integrated? 2Book Multiple Choice Print O I only. O Ill only O I and II only. O II and Ill only
