Question

1. Stryker Industries received an offer from an exporter for 20,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:

Domestic unit sales price	$21
Unit manufacturing costs:
Variable	9
Fixed	6

The differential cost from the acceptance of the offer is

a. $180,000

b. $320,000

c. $420,000

d. $120,000

2.Delaney Company is considering replacing equipment that originally cost $496,000 and has accumulated depreciation of $347,200 to date. A new machine will cost $738,000. The sunk cost in this situation is

a. $496,000

b. $589,200

c. $148,800

d. $119,040

Answer 1

1	Differenital cost=Size of special order*Variable manufacturing cost=20000*9=$ 180000
	Fixed manufacturing costs are not relevant
	Answer is
	a. $ 180000
2	Sunk costs are original cost and accumulated depreciation of old equipment
	Total sunk cost=original cost-accumulated depreciation=496000-347200=$ 148800
	Answer is
	c. $ 148800