Use the following information to answer 69-71

The Melrose Company produces a single product, Product C. Melrose has the capacity to produce 70,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows:

Direct Materials- 20

direct labor- 17

variable MOH- 13

Fixed MOH- 14

Variable selling expense- 12

Fixed Selling expense- 8

The regular selling price of one unit of Product C is $100. A special order has been received by Melrose from Moore Company to purchase 7,000 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $10,500 and will have no use after the special order is filled.

69. Assume that Melrose expects to sell 60,000 units of Product C to regular customers next year. At what selling price for the 7,000 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?

A) $53.00

B) $54.50

C) $75.00

D) $76.50

Level: Hard LO: 4 Ans: B

70. Assume Melrose expects to sell 60,000 units of Product C to regular customers next year. If Moore company offers to buy the special units at $90 per unit, the effect of accepting the special order on Melroses net operating income for next year will be:

A) $42,000 increase

B) $54,000 decrease

C) $105,000 increase

D) $248,500 increase

Level: Hard LO: 4 Ans: D

71. Suppose Melrose can sell 68,000 units of Product C to regular customers next year. If Moore Company offers to buy the special order units at $95 per unit, the effect of accepting the special order for 7,000 units on Melroses net operating income for next year will be a:

A) $93,500 increase

B) $104,000 increase

C) $114,500 increase

D) $294,000 increase

Level: Hard LO: 4 Ans: A