Question

QUESTION 1

1. Hubba Company has a current production capacity level of 200,000 units per month. The variable costs are $0.90 per unit. Allocated fixed costs are $0.50 per unit at the capacity level of 200,000 units. Total fixed costs are constant over the relevant range between 150,000 units and 200,000 units. Current monthly sales are 170,000 units at a per unit selling price of $3.00. Bubba Company has contacted Hubba Company about purchasing 25,000 units at $2.00 each. Current sales would not be affected by this one-time, special order and no additional fixed costs would be incurred on the special order. Assume that Hubba Company has decided to accept the special order, what will be the increase in monthly total costs?

   		$22,500
   		$273,000
   		$35,000
   		$175,500

QUESTION 2

1. Hubba Company has a current production capacity level of 200,000 units per month. The variable costs are $0.90 per unit. Allocated fixed costs are $0.50 per unit at the capacity level of 200,000 units. Total fixed costs are constant over the relevant range between 150,000 units and 200,000 units. Current monthly sales are 170,000 units at a per unit selling price of $3.00. Bubba Company has contacted Hubba Company about purchasing 25,000 units at $2.00 each. Current sales would not be affected by this one-time, special order and no additional fixed costs would be incurred on the special order.

   If Hubba accepts the special order, its monthly profit

   		will increase by $27,500
   		will increase by $15,000
   		will increase by $37,500
   		will increase by $25,000

Answer 1

Data II x Calculation : - As it is one time Special order, there will be I no increaye in Fixed cost g only variable cost. I will increme. Total Variable x Number Jarable Cost a Cost per unit of unity - 0.90 x 25000 UniH = $22500 Total cost = fixed cost & variable cost o +22500 $22500 = Increase in monthly total cost will be $22500 option 1 is correct. 0.2 Sales of special order = 25000 = $ 50000 $2 Increased sale Increased cost Increased profit = = less $50000 $22500 $ 27500 1 Option is correcto Calculate Sales I cost increased In Geased increased due to special ordee to get amount of profit