1. Walston Company produces kitchen cabinets for homebuilders across the Western United States. The cost of producing 5,000 cabinets is as follows:

Materials $ 500,000

Labor 250,000

Variable overhead 100,000

Fixed overhead 400,000

Total $1,250,000

Walston also incurs selling expenses of $20 per cabinet. Wellington Corp. has offered Walston $165 per cabinet for a special order of 1,000 cabinets. The cabinets would be sold to homebuilders in the Eastern United States and thus would not conflict with Walstons current sales. Selling expenses per cabinet for this special order would only be $5 per cabinet. Watson has available capacity to do the work.

Relevant cost per unit as computed by the Walstons accountant would be as follows:

Materials ($500,000/5,000) $100

Labor (250,000/5,000) 50

Variable Overhead (100,000/5,000) 20

Selling expenses 5

Total relevant cost per unit $175

3. How are financial statements used for performance evaluation. How would one use this performance evaluation to its advantage.