TB MC Qu. 23-73 (Algo) Lattimer Company had the following results...

Lattimer Company had the following results of operations for the past year:

Contribution margin income statement	Per Unit	Annual Total
Sales (15,600 units)	$ 12.00	$ 187,200
Variable costs
Direct materials	1.50	23,400
Direct labor	4.00	62,400
Overhead	1.00	15,600
Contribution margin	5.50	85,800
Fixed costs
Fixed overhead	1.00	15,600
Fixed selling and administrative expenses	1.40	21,840
Income	$ 3.10	$ 48,360

A foreign company offers to buy 5,200 units at $7.50 per unit. In addition to variable costs, selling these units would add a $0.25 selling expense for export fees. Lattimers annual production capacity is 25,600 units. If Lattimer accepts this additional business, the special order will yield a:

Multiple Choice

• $2,100 loss.

• $8,600 loss.

• $3,900 profit.

• $3,400 loss.

• $5,200 profit.

TB MC Qu. 23-94 (Algo) Tanner Company has old equipment...

Tanner Company has old equipment with a book value of $157,500 and a remaining five-year useful life. Tanner is considering purchasing new equipment at a price of $195,000. Tanner can sell the old equipment now for $130,000. The old equipment has variable manufacturing costs of $71,000 per year. The new equipment will reduce variable manufacturing costs by $28,500 per year over its five-year useful life. The total increase or decrease in net income by replacing the old equipment with the new equipment is:

Multiple Choice

• $31,500 decrease.

• $55,000 decrease.

• $140,000 increase.

• $77,500 increase.

• $55,000 increase.