A accept the counteroffer because the order will

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a. Accept the counteroffer because the order will increase operating income. b. Accept the counteroffer even though the order will decrease operating income. c. Reject the counteroffer even though the order will increase operating income. d. Reject the counteroffer because the order will decrease operating income.
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225 211. CSO: 2C2d LOS: 2C2n Synergy Inc. produces a component that is popular in many refrigeration systems. Data on three of the five different models of this component are as follows. Model A B C Volume needed (units) 5,000 6,000 3,000 Manufacturing costs Variable direct costs $10 $24 $20 Variable overhead 5 10 15 Fixed overhead 11 20 17 Total manufacturing costs $26 $54 $52 Cost if purchased $21 $42 $39 Synergy applies variable overhead on the basis of machine hours at the rate of $2.50 per hour. Models A and B are manufactured in the Freezer Department, which has a capacity of 28,000 machine processing hours. Which one of the following options should be recommended to Synergy's management? a. Purchase all three products in the quantities required. b. Manufacture all three products in the quantities required. c. The Freezer Department's manufacturing plan should include 5,000 units of Model A and 4,500 units of Model B. d. The Freezer Department's manufacturing plan should include 2,000 units of Model A and 6,000 units of Model B.
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226 212. CSO: 2C2d LOS: 2C2d Refrigerator Company manufactures ice-makers for installation in refrigerators. The costs per unit, for 20,000 units of ice-makers, are as follows. Direct materials $ 7 Direct labor 12 Variable overhead 5 Fixed overhead 10 Total costs $34 Cool Compartments Inc. has offered to sell 20,000 ice-makers to Refrigerator Company for $28 per unit. If Refrigerator accepts Cool Compartments’ offer, the facilities used to manufacture ice- makers could be used to produce water filtration units. Revenues from the sale of water filtration units are estimated at $80,000, with variable costs amounting to 60% of sales. In addition, $6 per unit of the fixed overhead associated with the manufacture of ice-makers could be eliminated. For Refrigerator Company to determine the most appropriate action to take in this situation, the total relevant costs of make vs. buy, respectively, are a. $600,000 vs. $560,000. b. $648,000 vs. $528,000. c. $600,000 vs. $528,000. d. $680,000 vs. $440,000. 213. CSO: 2C2d LOS: 2C2d Sunshine Corporation is considering the purchase of a new machine for $800,000. The machine is capable of producing 1.6 million units of product over its useful life. The manufacturer’s engineering specifications state that the machine-related cost of producing each unit of product should be $.50. Sunshine’s total anticipated demand over the asset’s useful life is 1.2 million units. The average cost of materials and labor for each unit is $.40. In considering whether to buy the new machine, would you recommend that Sunshine use the manufacturer’s engineering specification of machine-related unit production cost?
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