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Paragon Products Sells a Special Type of Navigation Equipment for $1,300.Variable

question 49

Multiple Choice

Paragon Products sells a special type of navigation equipment for $1,300.Variable costs are $800 per unit.When a special order arrived from a foreign contractor to buy 42 units at a reduced sales price of $900 per unit,there was a discussion among the managers.The controller said that as long as the special price was greater than the variable costs,the sale would contribute to the company's profits and should be accepted as offered.The vice president,however,decided to decline the order.Which of the following statements supports the decision of the vice president?

Understand the principles of activity-based costing.

Calculate activity rates for different activity cost pools under activity-based costing.

Determine the overhead applied to specific products using activity-based costing.

Identify differences between activity-based costing and traditional costing methods.

Definitions:

Fair Value Gain

Positive changes in the fair market value of investments or assets, reflecting increased worth.

Available-for-sale Financial Assets

Financial assets not classified as held for trading, held to maturity, or loans and receivables, and are thus measured at fair value with changes recognized in other comprehensive income.

Consolidated Statements

Financial statements that present the assets, liabilities, equity, income, expenses, and cash flows of a parent company and its subsidiaries as a single economic entity.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee, without having full control or joint control, typically associated with ownership of 20% to 50% of voting stock.