Multiple Choice Select the best answer to each question. Space is provided for computations after the quantitative questions. 1. In regard to supply and demand, de- mand is affected by: a customers, competitors, and costs. b, customers and competitors. c. customers and costs. d. competitors and costs. 2. (CPA) Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at variable costs of $750,000 and fixed costs of $450,000. Fixed costs will remain the same be- tween 200,000 and 300,000 batons. Based on Relay's predictions, 240,000 batons will be sold at the regular price of $5.00 each. In addition, a one-time- only special order was received for 60,000 batons to be sold at a 40% dis- count off the regular price. By what amount does operating income increase or decrease as a result of accepting the special order? a. $30,000 increase b. $60,000 decrease c. $36,000 increase d. $180,000 increase 3. (CPA) Nile Co.'s cost allocation and product-costing procedures follow activ- ity-based costing principles. Activities related to each product have been identi- fied and classified as being either value- adding or nonvalue-adding. Which of the following activities, used in Nile's production process, is nonvalue-adding? a. Design engineering activity b. Heat treatment activity c. Drill press activity d Materials storage activity 5. (CPA) Purvis Company manufactures a product that has a variable cost of $50 per unit. Fixed costs total $1,000,000 and are allocated on the basis of the number of units produced. Selling price is computed by adding a 10% markup to fuil cost of the product. How much should the selling price per unit be for 100,000 units? a. $55 b. $60 c. $61 d. $66 6. (CPA) Diva Co. wants to establish a selling price that will yield a gross mar- gin of 40% on the sales revenue of a product whose cost is $12.00 per unit. The selling price should be: a. $16.80. b. $19.20. c. $20.00. d. $30.00