Reference no: EM133535489
Question 1. Bluebird Manufacturing has received a special one-time order for 15,900 bird feeders at $3.90 per unit. Bluebird currently produces and sells 75,000 units at $7.90 each. This level represents 80% of its capacity. Production costs for these units are $4.40 per unit, which includes $3.15 of variable costs and $2.15 of fixed costs. If the special offer is accepted, there will be no incremental fixed cost. If Bluebird accepts this additional business, the effect on income will be:
Question 2.
Markson Company had the following results of operations for the past year:
| Contribution margin income statement | Per Unit | Annual Total |
| Sales (12,000 units) |
$ 20.00 |
$ 240,000 |
| Variable costs |
|
|
| Direct materials |
4.25 |
51,000 |
| Direct labor |
6.00 |
72,000 |
| Overhead |
2.00 |
24,000 |
| Contribution margin |
7.75 |
93,000 |
| Fixed costs |
|
|
| Fixed overhead |
4.25 |
51,000 |
| Income |
$ 3.50 |
$ 42,000 |
A foreign company offers to buy 4,000 units at $14 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $3,200 for the purchase of special tools. Markson's annual productive capacity is 18,000 units. If Markson accepts this additional business, its profits will:
Question 3. Kobe Company has manufactured 200 partially finished cabinets at a cost of $100,000. These can be sold as is for $120,000. Instead, the cabinets can be stained and fitted with hardware to make finished cabinets. Further processing costs would be $24,000, and the finished cabinets could be sold for $160,000. If Kobe Company processes the cabinets further, incremental income is: