Black Cat Corp manufactures a product with the following full unit costs at a volume of 4,000 units:
Direct materials $ 200
Direct labor 80
Manufacturing overhead (30% variable) 150
Fixed Selling expenses 50
Administrative expenses (10% variable) 80
Total per unit $560
A company recently approached Black Cat's management with an offer to purchase 450 units for $550 each. Black Cat currently sells the product to dealers for $800 each. Black Cat's capacity is sufficient to produce the extra 450 units. No selling expenses would be incurred on the special order. If Black Cat's management accepts the offer, profits will
1. increase by $97,650
2. decrease by $24,000
3. increase by $66,800
4. decrease by $120,000

Activity-based costing (abc) is not truly a cost collection mechanism as much as it is an inventory valuation method. the main purpose for implementing an activity-based cost system is to try to overcome some of the cost distortions that occur in traditional costing from product differences when there are variations in size and complexity. however, one of the disadvantages of utilizing abc is that the additional information gathering necessary to implement costing with that level of detail might be beyond the reach of some companies with resource or financial constraints. with this in mind, what kinds of industries or companies do you think would benefit most from using activity-based costing and why? in designing or modifying an accounting system to capture appropriate costs for abc, what considerations do you think would need to be made?