Question

Continuous improvement:

Multiple Choice

• Is not applicable to most businesses.

• Encourages employees to maintain established business practices.

• Is possible only in service businesses.

• Strives to preserve acceptable levels of performance.

• Rejects the notion of "good enough."

A job cost sheet does not contain information that is useful for managing the production process.

True or False

Markson Company had the following results of operations for the past year:

Sales (8,000 units at $20.80)				$	166,400
Variable manufacturing costs	$	89,200
Fixed manufacturing costs		15,800
Variable administrative expenses		15,200
Fixed selling and administrative expenses		20,800			(141,000	)
Operating income				$	25,400

A foreign company offers to buy 2,000 units at $15.20 per unit. In addition to variable manufacturing and administrative costs, selling these units would increase fixed overhead by $1,680 for the purchase of special tools. Markson’s annual productive capacity is 12,000 units. If Markson accepts this additional business, its profits will:

Multiple Choice

• Decrease by $4,850.

• Increase by $4,300.

• Increase by $2,620.

• Decrease by $5,980.

• Decrease by $1,680.

Answer 1

Correct answer------------Increase by $2,620

Working

financial advantage (disadvantage) of accepting the special order
Additional Revenue from offer (2000 x $15.2)	$ 30,400
Less: Total Additional cost due to acceptance of offer	$ 27,780
Financial Advantage	$ 2,620

.

Calculation of Additional Cost of Order
	Per Unit	Total
Variable manufacturing cost	$     11.15	$ 22,300
Variable administrative costs	$       1.90	$ 3,800
Additional fixed cost		$ 1,680
Total Additional cost due to acceptance of order	$     13.05	$ 27,780

None of the fixed cost will be incurred for special order except $1680.