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
b. $1.20
c. $7.35
d. $8.90
2. Walloon Company produced 150 defective units last month at a unit manufacturing cost of $30. The defective units were discovered before leaving the plant. Walloon can sell them “as is” for $20 or can rework them at a cost of $15 and sell them at the regular price of $50. What is the total relevant cost of reworking the defective units?
a. $2,250
b. $3,000
c. $4,500
d. $6,750
3. Pasha Company produced 50 defective units last month at a unit manufacturing cost of $30. The defective units were discovered before leaving the plant. Pasha can sell them “as is” for $20 or can rework them at a cost of $15 and sell them at the regular price of $50. Which of the following is not relevant to the sell-or-rework decision?
a. $30
b. $20