Reference no: EM132536507

The Food Delivery Company is considering expanding its business. This expansion involves delivering baked goods on a door-to door basis. This would require $12,500 additional labor cost per month.

Question 1: Company-owned vehicles now used to make morning deliveries to food stores could be used in the afternoons to make home deliveries. However, it is estimated that an additional $5,000 would be required per month for vehicle expense. It is further estimated that the home delivery use of the trucks would be allocated 45% of the existing $6,500 vehicle fixed cost. What is the differential delivery cost per month for the home deliveries?

Select one:

Option a. $ 17,500

Option b. $ 20,425

Option c. $ 12,500

Option d. $ 24,000

Question 2: Radwan Company has a current production level of 25,000 units per month. Unit costs at this level are:

Direct materials $0.35

Direct labor 0.40

Variable overhead 0.15

Fixed overhead 0.40

Marketing - fixed 0.20

Marketing/distribution - variable 0.60

Current monthly sales are 20,000 units. Jamil Company has contacted Radwan Company about purchasing 2,000 units at $1.50 each. Current sales would not be affected by the one-time-only special order, and variable marketing/distribution costs would not be incurred on the special order. What is Radwan Company's change in operating profits if the special order is accepted?

Select one:

Option a. $ 1,200 increase in operating profits

Option b. $ 1,200 decrease in operating profits

Option c. No effect on operating profits

Option d. $ 400 increase in operating profits