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The following information is available for the next three (3) questions: A production cost summary for Davidson Company follows: Unit-level direct material $5.00/unit Unit-level direct labor 2.00/unit Unit-level overhead 6.00/unit Product-level overhead 4.00/unit Total cost per unit $17.00 Fixed facility-level selling costs are $600,000 per year and unit-level selling costs are $2. The unit-level selling costs consist primarily of shipping and packaging costs. Production capacity is 400,000 units, but Davidson only expects to produce (and sell) 250,000 units next year. The normal selling price of the product is $30 per unit. A merchant from Venice, Italy has made an offer to purchase 50,000 units at $24 each.

7. The relevant incremental cost per unit associated with the special order is a. $15. b. $13. C. $9, d. $11 8. If Davidson accepts the special offer, profitability will a. increase by $450,000. b. decrease by $450,000. C. increase by $550,000. d. decrease by $550,000

9. Select the true statement from the following choices. a. the facility-level selling costs are relevant to the special offer decision. b. the product-level production costs are relevant to the special offer decision. c. the unit-level selling costs are not relevant to the special offer decision. d. all of the statements are false.

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