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A company has been offered a special order to sell $1,000$ units of a product at a price of $$50$ per unit. The normal selling per unit is $$52.$ The company has spare operating capacity and can typically produce standard units using direct materials that cost $$20$ per unit and direct labor costs of $$20$ per unit. However, the firm can get a volume discount on materials which will lower the per$-$unit materials cost by $$5.$

What will be the effect on net income from accepting the special order?

$$10,000$ increase

$$10,000$ decrease

$$15,000$ decrease

$$15,000$ increase

A retailer is trying to choose how to allocate $100$ square feet of floor space and is considering two different product options. Both products require the full $100$ square feet, so the retailer cannot mix and match between the two products, making floor space the scarce resource.

Product A requires $2$ square feet per unit and costs $$30$ per unit. The retailer can sell Product A for $$50$ per unit and sell $1,000$ units per month.

Product B requires $5$ square feet per unit and costs $$80$ per unit. The retailer can sell product B for $$300$ per unit and sell $100$ units per month.

Which product should the retailer stock and what will be its annual effect on profits given the retailer's scarcity of floor space?

Product B and $$240,000$

Product A and $$240,000$

Product B and $$264,000$

Product A and $$264,000$

A company makes two products: Product A and Product B$.$ The information for the two products is as follows:

Product A Product B

Selling Price $$100$ $$250$

Material $$40$ $$80$

Labor $$15$ $$40$

Variable Costs $$10$ $$25$

Material is a scarce resource. Product A takes two pounds of material and Product B takes four pounds. Labor takes one hour for Product A and three hours for Product B$.$

How much would the company be willing to pay for one more pound of materials?

$$62\mathrm{.}50$

$$42\mathrm{.}00$

$$20\mathrm{.}00$

$$17\mathrm{.}50$

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