Question

9.

A company has three product lines, one of which reflects the following results:

Sales	$241000
Variable expenses	139000
Contribution margin	102000
Fixed expenses	130000
Net loss	$ (28000)

If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company’s net income will

decrease by $24000.

increase by $24000.

increase by $28000.

decrease by $102000.

10. It costs Marigold Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 3400 units at $21 each. Marigold would incur special shipping costs of $2 per unit if the order were accepted. Marigold has sufficient unused capacity to produce the 3400 units. If the special order is accepted, what will be the effect on net income?

$10200 increase

$3400 decrease

$3400 increase

$61200 increase

11. Oriole Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480000 when 10000 units were produced and sold. The company has a one-time opportunity to sell an additional 1000 units at $130 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:

Income would increase by $130000.

Income would increase by $30000.

Income would increase by $18000.

Income would decrease by $18000.

12. A company contemplating the acceptance of a special order has the following unit cost behavior, based on 10000 units:

Direct materials	$ 4
Direct labor	10
Variable overhead	8
Fixed overhead	6

A foreign company wants to purchase 3800 units at a special unit price of $25. The normal price per unit is $40. In addition, a special stamping machine will have to be purchased for $4000 in order to stamp the foreign company’s name on the product. The incremental income (loss) from accepting the order is

$7400.

$11400.

$(11400).

$(3800).

Marigold Corp. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:

	Old Equipment		New Equipment
Purchase price	$265000		$432000
Accumulated depreciation	106000		- 0 -
Annual operating costs	348000		273000

If the old equipment is replaced now, it can be sold for $71500. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.

Which of the following amounts is irrelevant to the replacement decision?

$360500

$159000

$71500

$432000

21. Marigold Corp. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:

	Old Equipment		New Equipment
Purchase price	$225000		$375000
Accumulated depreciation	90000		- 0 -
Annual operating costs	292000		231000

If the old equipment is replaced now, it can be sold for $60000. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets.

The net advantage (disadvantage) of replacing the old equipment with the new equipment is

$(10000)

$90000`

$60000

$(67000)

Answer 1

Geven datu; Sales $ 241000 variable expanses 39000 Contribuition Margin 102000 fixed enpauses Boooo Net lors $28000 . other 90% of the fired expanses allocated to product lines . 130000 a nor . =$52 000 Met loss is $28000 Option "t $24000 is correct. Deceased by $ 24000 .. Teos conjpensated - fixed Papantes incesto see $ 28000 - $52000 pool na

(10) Given data, variable cost = &18 Special shipping cost is $2 foreign wholesaler 3400 units at $2 offers to purchase each. Total relevant cost per unit 5 $ 18+ $ & Effect on Wer m met income = 3400 x income = 2400 721-20) = $ 3400 option 'B' is correct.

: solution (11) If the company has sufficient Capacity to poorece. the add-onas units, then the effect of acceptance of the special order on net income. sales revenue a looo 130 130 000 rasinable cost = 1000 x 100 E lon tud Net income a sales revenue - Variable - cost .130000 - 100000 .. = 30 ovo Caneceased) hener Income would increase by $30000 option 'B' is correct..