1. Palmer’s Gourmet Chocolates produces and sells assorted boxed chocolates. The unit selling price is $50 per box, unit variable costs are $25 per box, and total fixed costs for the company are $2,000. 1a. How many boxes of chocolates must Palmer’s Gourmet Chocolates sell to break even? 1b. What are breakeven sales in dollars? 2. Extreme Sports received a special order for 1,000 units of its extreme motorbike at a selling price of $250 per motorbike. Extreme Sports has enough extra capacity to accept the order. No additional selling costs will be incurred. Unit costs to make and sell this product are as follows: direct materials, $100; direct labor, $50; variable manufacturing overhead, $14; fixed manufacturing overhead, $10. 2a. List the relevant costs for the decision of whether or not to accept the special order. 2b. What will be the change (difference) in operating income if Extreme Sports accepts the special order? c. Should Extreme Sports accept the special order? Why or why not? 3. Totally Technology manufactures two product lines: Cameras and Video Recorders. The company’s product line income statement follows: Management is considering discontinuing the Video Recorder product line. Accountants for the company estimate that discontinuing the Video Recorder line will decrease fixed cost of goods sold by $10,000 and fixed marketing and administrative expenses by $4,000. repare an analysis supporting your opinion about whether or not the Video Recorder product line should be discontinued.
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