answer+of+multiple+choice

 [|(See related pages)] |||||||| =Results Reporter = ||
 * Multiple Choice Quiz
 * Out of 10 questions, you answered 0 correctly with a final grade of 0% ||
 * || 0 correct (0%) || [[image:http://highered.mheducation.com/olcweb/styles/shared/bargraph.gif width="0%" height="14"]] ||  ||
 * || 10 incorrect (100%) || [[image:http://highered.mheducation.com/olcweb/styles/shared/bargraph.gif width="100%" height="14"]] ||  ||
 * || 0 unanswered (0%) || [[image:http://highered.mheducation.com/olcweb/styles/shared/bargraph.gif width="0%" height="14"]] ||  ||
 * || 10 incorrect (100%) || [[image:http://highered.mheducation.com/olcweb/styles/shared/bargraph.gif width="100%" height="14"]] ||  ||
 * || 0 unanswered (0%) || [[image:http://highered.mheducation.com/olcweb/styles/shared/bargraph.gif width="0%" height="14"]] ||  ||


 * === Your Results: === ||
 * The correct answer for each question is indicated by a [[image:http://highered.mheducation.com/olcweb/styles/shared/correct.gif width="15" height="15" caption="This is the correct answer."]]. ||

<span style="background-color: rgba(255,255,255,0);">The following are the Mulligan Company's unit costs of making and selling an item at a volume of 30,000 units per month (which represents the company's capacity):
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">1 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]

<span style="background-color: rgba(255,255,255,0);">

<span style="background-color: rgba(255,255,255,0);">Assume the company has 300 units left over from last year which have small defects and which will have to be sold at a reduced price as scrap. This would have no effect on the company's other sales. The variable selling and administrative costs would have to be incurred to sell the defective units. What cost is relevant as a guide for setting a minimum price on these defective units? || <span style="background-color: rgba(255,255,255,0);">The correct answer is A (Learning Objective 1): <span style="background-color: rgba(255,255,255,0);">A relevant cost is a cost that differs between alternatives in a decision-making situation. Since the product costs ($6 + $12 + $2 + $4 = $24 in total) have already been incurred and cannot be avoided at this point (i.e. they're sunk costs), the only relevant costs are the additional costs that would be incurred if the decision is made to sell (versus scrap or throw away) the defective units. The fixed selling and administrative costs are not relevant since they cannot be avoided. As such, only the additional costs incurred to sell the units, the variable selling and administrative costs of $8 per unit, are relevant as a guide for setting a minimum price on these defective units. || <span style="background-color: rgba(255,255,255,0);">The O'Toole Company has 3,200 obsolete cell phones that are carried in inventory at a total cost of $213,600. If these cell phones are upgraded at a total cost of $80,000, they can be sold for a total of $240,000. As an alternative, the cell phones can be sold in their present condition for $89,600. The sunk cost in this situation is: || <span style="background-color: rgba(255,255,255,0);">The correct answer is D (Learning Objective 1): <span style="background-color: rgba(255,255,255,0);">A sunk cost is a cost that has already been incurred and that cannot be changed by any decision made now or in the future. In this situation, the total carrying value of the inventory of $213,600 is the sunk cost (and, as such, will not be relevant to the decision). || <span style="background-color: rgba(255,255,255,0);">Costs that are always relevant in decision-making are: || <span style="background-color: rgba(255,255,255,0);">The correct answer is A (Learning Objective 1): <span style="background-color: rgba(255,255,255,0);">An avoidable cost is a cost that can be eliminated (in whole or in part) by choosing one alternative over another in a decision-making situation. This term is synonymous with relevant cost and differential cost. || <span style="background-color: rgba(255,255,255,0);">The managers of a firm are in the process of deciding whether to accept or reject a special offer for one of its products. A cost that is not relevant to their decision is the: || <span style="background-color: rgba(255,255,255,0);">The correct answer is A (Learning Objective 1): <span style="background-color: rgba(255,255,255,0);">A relevant cost is a cost that differs between alternatives in a decision-making situation. A common fixed cost is a cost that supports the operations of more than one segment of an organization and is not avoidable in whole or in part by eliminating any one segment. As such, a common fixed cost, such as the common fixed overhead that will continue if the special order is not accepted, is not a relevant cost. Since direct materials, fixed overhead that will be avoided if the special order is accepted, and variable overhead differ between the alternatives in this decision-making situation, they are all relevant to the decision || <span style="background-color: rgba(255,255,255,0);">The Pixalator Corporation has 8,000 obsolete units of a product that are carried in inventory at a manufacturing cost of $160,000. If the units are remachined for $40,000, they could be sold for $72,000. Alternatively, the units could be sold for scrap for $28,000. Which alternative is more desirable and what are the total relevant costs for that alternative? || <span style="background-color: rgba(255,255,255,0);">The correct answer is A (Learning Objective 1): <span style="background-color: rgba(255,255,255,0);">Note that the manufacturing costs is a sunk cost (i.e., a cost that has already been incurred and that cannot be changed by any decision made now or in the future) and, as such, is not a relevant cost of either alternative in this situation. Remachining the units will increase net operating income by $32,000 (or $72,000 – $40,000). Scrapping the units will increase net operating income by only $28,000. As such, remachining the units is the more desirable alternative. The relevant cost of the remachining alternative is $40,000, which is the cost of remachining the units. || <span style="background-color: rgba(255,255,255,0);">A study has been conducted to determine if one of the product lines of Lake Shore Company should be discontinued. The contribution margin in the product line is $300,000 per year. Fixed expenses allocated to the product line are $390,000 per year. It is estimated that $240,000 of these fixed expenses could be eliminated if the product line is discontinued. These data indicate that if the product line is discontinued, the company's overall net operating income would: || <span style="background-color: rgba(255,255,255,0);">The correct answer is A (Learning Objective 2): <span style="background-color: rgba(255,255,255,0);">If the department is discontinued, the change in the company's overall net operating income will be determined as follows:
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$8 per unit ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$18 per unit ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$32 per unit ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$36 per unit ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">2 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$0 ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$80,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$89,600. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$213,600. ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">3 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">avoidable costs. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">fixed costs. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">sunk costs. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">variable costs. ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">4 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">common fixed overhead that will continue if the special offer is not accepted. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">direct materials. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">fixed overhead that will be avoided if the special offer is accepted. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">variable overhead. ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">5 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">Remachine; $40,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">Remachine; $200,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">Scrap; $132,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">Scrap; $160,000. ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">6 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">decrease by $60,000 per year. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">increase by $60,000 per year. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">decrease by $150,000 per year. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">increase by $150,000 per year. ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:

<span style="background-color: rgba(255,255,255,0);"> || <span style="background-color: rgba(255,255,255,0);">Michiana Company manufactures 4,000 parts per year; the parts are used in the assembly of one of the company's products. The unit product cost of these parts is:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">7 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]

<span style="background-color: rgba(255,255,255,0);">

<span style="background-color: rgba(255,255,255,0);">The part can be purchased from an outside supplier at $40 per unit. If the part is purchased from the outside supplier, two-thirds of the fixed manufacturing costs can be eliminated. The annual impact on the company's net operating income as a result of buying the part from the outside supplier would be: || <span style="background-color: rgba(255,255,255,0);">The correct answer is C (Learning Objective 3): <span style="background-color: rgba(255,255,255,0);">The annual impact on the company's net operating income as a result of buying the part from the outside supplier is determined as follows.
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$8,000 increase. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$8,000 decrease. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$16,000 increase. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$16,000 decrease. ||
 * <span style="background-color: rgba(255,255,255,0);">Feedback:
 * <span style="background-color: rgba(255,255,255,0);">Feedback:

<span style="background-color: rgba(255,255,255,0);"> || <span style="background-color: rgba(255,255,255,0);">Superior Corporation manufactures solar powered calculators. The company can manufacture 1,200,000 calculators a year at a variable cost of $3,000,000 and a fixed cost of $1,800,000. Based on management's projections for next year, 960,000 calculators will be sold at the regular price of $20.00 each. A special order has been received for 240,000 calculators to be sold at a 70% discount off the regular price. Total fixed costs would be unaffected by this order. By what amount would the company's net operating income be increased as a result of the special order? || <span style="background-color: rgba(255,255,255,0);">The correct answer is C (Learning Objective 4): <span style="background-color: rgba(255,255,255,0);">First, compute the variable cost per unit as follows. Total variable costs of $3,000,000 ÷ 1,200,000 units = $2.50 per unit. Then, determine the impact on net operating income as follows:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">8 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$480,000 ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$600,000 ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$840,000 ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$1,440,000 ||
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<span style="background-color: rgba(255,255,255,0);"> || <span style="background-color: rgba(255,255,255,0);">Tiefenthaler Company sells its product for $126 per unit. The company's unit product cost based on the full capacity of 300,000 units is as follows:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">9 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]

<span style="background-color: rgba(255,255,255,0);">

<span style="background-color: rgba(255,255,255,0);">A special order offering to buy 120,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be $18 per unit for shipping. The company 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. In negotiating a price for the special order, what should the minimum acceptable selling price per unit be? || <span style="background-color: rgba(255,255,255,0);">The correct answer is A (Learning Objective 4): <span style="background-color: rgba(255,255,255,0);">The incremental costs of accepting this special order would typically be the variable costs of the units, which include:
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$84. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$90. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$96. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$108. ||
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 * <span style="background-color: rgba(255,255,255,0);">Feedback:

<span style="background-color: rgba(255,255,255,0);"> || <span style="background-color: rgba(255,255,255,0);">Consider the following production and cost data for two products, X and Y:
 * <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="1"]] ||
 * <span style="background-color: rgba(255,255,255,0);">10 INCORRECT || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="5" height="1"]] |||| <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="1" height="5"]]

<span style="background-color: rgba(255,255,255,0);">

<span style="background-color: rgba(255,255,255,0);">The company can only perform 260,000 machine set-ups each period due to limited skilled labor. There is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period? || <span style="background-color: rgba(255,255,255,0);">The correct answer is B (Learning Objective 5): <span style="background-color: rgba(255,255,255,0);">First, determine which product generates the higher CM per setup as follows. <span style="background-color: rgba(255,255,255,0);">CM per setup = CM per unit ÷ number of setups per unit. <span style="background-color: rgba(255,255,255,0);">Product X: <span style="background-color: rgba(255,255,255,0);">CM per setup = $520 ÷ 40 = $13 per setup <span style="background-color: rgba(255,255,255,0);">Product Y: <span style="background-color: rgba(255,255,255,0);">CM per setup = $480 ÷ 32 = $15 per setup <span style="background-color: rgba(255,255,255,0);">Then, determine the total CM that would be generated if the product with the higher CM per setup (that is, product Y) is produced as follows:
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **A)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$3,380,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/v2_glencoe/images/correct.gif]] ||> **B)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$3,900,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **C)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$3,640,000. ||
 * || <span style="background-color: rgba(255,255,255,0);">[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="40" height="1"]] ||> **D)**[[image:http://highered.mheducation.com/olcweb/styles/shared/spacer.gif width="10" height="1"]] || <span style="background-color: rgba(255,255,255,0);">$7,280,000. ||
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