CompuTronics, a Manufacturer of Computer Peripherals, Has Excess Capacity The Traceable Fixed Administrative Cost Was Incurred at the Utah

question 82

Multiple Choice

CompuTronics, a manufacturer of computer peripherals, has excess capacity. The company's Utah plant has the following per-unit cost structure for item no. 89: $$\begin{array} { l r } \text { Variable manufacturing } & \$ 40 \\\text { Fixed manufacturing } & 15 \\\text { Variable selling } & 8 \\\text { Fixed selling } & 11 \\\text { Traceable fixed administrative } & 4 \\\text { Allocated administrative } & 2\end{array}$$ The traceable fixed administrative cost was incurred at the Utah plant; in contrast, the allocated administrative cost represents a "fair share" of CompuTronics' corporate overhead. Utah has been presented with a special order of 5,000 units of item no. 89 on which no selling cost will be incurred. The proper relevant cost in deciding whether to accept this special order would be:

• A) $40.
• B) $59.
• C) $61.
• D) $80.
• E) None of the other answers are correct.

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Definitions:

Ordinary Interest

A method for calculating interest based on a 360-day year.

360-Day Year

A 360-day year is an accounting practice that treats each month as having 30 days, simplifying interest calculations in the financial industry.

Total Amount

The aggregate sum resulting from the addition of numbers, amounts, objects, etc.

Ordinary Interest

Interest calculation based on a 360-day year, often used in banking and finance, as opposed to real interest which is based on a 365-day year.