[Huynh]

Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production.

Should the company accept the special order?

a. No, because additional production would exceed capacity.
b. No, because incremental costs exceed incremental revenue.
c. Yes, because incremental revenue exceeds incremental costs.
d. Yes, because incremental costs exceed incremental revenues.
e. No, because the incremental revenue is too low.

[Huynh]

Which of the following factors is least likely to be considered in preparing a sales budget?

a. Plant capacity.
b. General economic and industry conditions.
c. Past sales volume.
d. The capital expenditures budget.
e. Proposed selling expenses, such as advertising.