[The Following Information Applies to the Questions Displayed Below

question 45

Multiple Choice

[The following information applies to the questions displayed below.]
Burns Industries currently manufactures and sells 20,000 power saws per month,although it has the capacity to produce 35,000 units per month.At the 20,000-unit-per-month level of production,the per-unit cost is $65,consisting of $40 in variable costs and $25 in fixed costs.Burns sells its saws to retail stores for $80 each.Allen Distributors has offered to purchase 5,000 saws per month at a reduced price.Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs.
-Which of the following is not a relevant factor in Burns' decision concerning whether to accept the special order from Allen?

• A)The opportunity cost involved in accepting Allen's order.
• B)The incremental cost of manufacturing an additional 5,000 saws per month.
• C)The $65 average cost per unit to manufacture a power saw.
• D)Where and at what price Allen intends to sell the saws.

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Definitions:

Par Value

The stated value of a bond, stock share, or coupon as designated by the issuer.

Resold

The act of selling an item or asset that has already been purchased.

Net Income

The profit a company generates after all expenses, taxes, and costs have been deducted from total revenue.

Common Stock

Equity ownership in a corporation, with voting rights and potential dividends, but last in priority for assets and income.