1. A company is within plant capacity. It is contemplating whether a special order should be accepted. Since the company does have excess capacity, the order will not impact regular production or regular sales. If the company accepts the special order, what will occur?

a. Incremental costs will not be affected

b. Net income will increase if the special sales price per unit exceeds the unit variable costs

c. There are no incremental revenues

d. Both fixed and variable costs will certainly increase

2. Hermantic Inc. can produce 100 units of a component part with the following costs:

If Hermantic, Inc. purchases the components externally for $120,000, by what amount will its total costs change if none of the fixed overhead is avoidable?

a. An increase of $120,000

b. An increase of $26,000

c. An increase of $7,000

d. A decrease of $33,000

Transcribed Image Text:

Direct Materials Direct Labor Variable Overhead Fixed Overhead $45,000 $20,000 $48,000 $33,000 Direct Materials Direct Labor Variable Overhead Fixed Overhead $45,000 $20,000 $48,000 $33,000

Answer rating: 100% (QA)

1 B Net income will increase if the special sales price per unit exceed... View the full answer