Select the best answer to each question. Space is provided for computations after the quantitative questions. ___ 1. In regard to supply and demand, demand 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 between 200,000 and 300,000 batons. Based on Relays 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% discount 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 activity-based costing principles. Activities related to each product have been identified and classified as being either value-adding or nonvalue-adding. Which of the following activities, used in Niles production process, is nonvalue-adding? a. Design engineering activity b. Heat treatment activity c. Drill press activity d. Materials storage activity ____ 4. For a company manufacturing personal computers, a graph of locked-in costs and incurred costs shows: a. locked-in costs rising much faster initially than incurred costs, but dropping to zero after the product is manufactured. b. locked-in costs rising much faster initially than incurred costs, but joining the incurred cost line at the completion of the value-chain functions. c. the two cost lines running parallel until the end of the production process, where they join. d. no differences unless the product is manufactured inefficiently. ___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 full 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 margin of 40% on the revenues 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. ____7. (CPA) Briar Co. signed a government construction contract providing for a formula price of actual cost plus 10% of cost. In addition, Briar was to receive one-half of any savings resulting from the formula price being less than the target price of $2,200,000. Briars actual costs incurred were $1,920,000. How much should Briar receive from the contract? a. $2,060,000 b. $2,112,000 c. $2,156,000 d. $2,200,000 ____ 8. Peak-load pricing is: a. an illegal form of price discrimination. b. a legal form of price discrimination. c. illegal, but is not a form of price discrimination. d. legal, but is not a form of price discrimination.