Reference: 09-04
Varone Company Makes a Single Product Called a Hom

question 38

Multiple Choice

Reference: 09-04
Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs per year. Per unit costs to produce and sell one Hom at that activity level are as follows: $$\begin{array} { | l | c | } \hline \text { Direct materials } & \$ 20 \\\hline \text { Direct labour } & 10 \\\hline \text { Variable manufacturing overhead } & 5 \\\hline \text { Fixed manufacturing overhead } & 7 \\\hline \text { Variable selling expense } & 8 \\\hline \text { Fixed selling expense } & 2 \\\hline\end{array}$$ The regular selling price for one Hom is $60. A special order has been received at Varone from the Fairview Company to purchase 8,000 Homs next year at 15% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 25%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost
$12,000 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labour is a
variable cost.
-If Varone has an opportunity to sell 37,960 Homs next year through regular channels and the special order is accepted for 15% off the regular selling price, the effect on net operating income next year due to accepting this order would be a:

• A)$35,480 increase.
• B)$33,320 increase.
• C)$35,480 decrease.
• D)$33,320 decrease.

Identify the characteristics and functions of operating systems.

Understand the role and impact of electronic spreadsheets in decision making and data analysis.

Learn about the importance and methods of disaster recovery planning in businesses.

Recognize the significance of secure networks and data transmission methods within and outside an organization.

---

Definitions:

Case Study

An in-depth look at a single individual.

Archival Study

A research method that involves analyzing existing records or documents to gather data and study patterns or trends.

Naturalistic Observation

A research method in which subjects are observed in their natural environment without any manipulation by the observer.

Surveys

A research method involving the collection of data from a predefined group of respondents to gather information and insights about various topics.