A Company Is Considering a Special Order for 1,000 Units

question 135

Multiple Choice

A company is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be $11.50) .The order would require specialized materials costing $4.00 per unit.Direct labor and variable factory overhead would cost $2.15 per unit.Fixed factory overhead is $1.20 per unit.However,the company has excess capacity and acceptance of the order would not raise total fixed factory overhead.The warehouse,however,would have to add capacity costing $1,300.Which of the following is relevant to the special order?

• A)$11.50 normal selling price
• B)$1.20 fixed factory overhead per unit
• C)$7.35 spent on donuts and coffee
• D)$8.90 selling price per unit of special order
• E)none of these

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Definitions:

Crown Gears

A type of gear with teeth projecting at right angles to the plane of the wheel, allowing for angular transmission of torque, often used in differentials.

Pinion

A smaller, usually stub-shaped gear used to drive a larger gear in an arrangement such as crown and pinion gearing in final drive carriers or the starter motor pinion that engages with the flywheel ring gear.

Tandem Drive Axle

A configuration in heavy-duty vehicles where two drive axles are placed in close proximity to distribute the load more evenly across the wheels.

Power Divider

A component in vehicle drivetrains, particularly in heavy trucks, used to distribute power evenly across multiple axles.