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I need a help in Financial accounting questions.(2) 1. One of a...


I need a help in Financial accounting questions.(2)

1.

One of a company's product lines (segments) has a contribution margin of $45,000 and fixed costs totaling $55,000. If the product line is dropped, $37,500 of the fixed costs will continue unchanged. As a result of dropping the product line, the company�s net operating income should:

increase by $27,500.
decrease by $45,000.
decrease by $27,500.
increase by $7,500.

2.

EastWest
Sales$1,020,000 $932,000
Variable expenses504,000 336,000
Traceable fixed expenses332,000 270,000
Allocated common corporate expenses
252,000

202,000

Net operating income (loss)
$(68,000)

$124,000


The company is considering dropping the East Division. If East Division were eliminated, its traceable fixed expenses could be avoided. The allocated common corporate expenses would be unaffected. Given these data, the elimination of East Division would result in an overall company net operating income (loss) of:

$(128,000)
$124,000
$56,000
$192,000

3.

A company that makes motorcycles is operating at 70% of plant capacity. Management is considering making the headlights that are currently being purchased from an outside supplier for $47 each. The plant has idle equipment that could be used to manufacture the headlights. Each headlight requires $13.00 of direct materials, $21 of direct labor, and $19.50 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision to make the headlights should result in a net gain (loss) for each headlight of: (Do not round your intermediate calculations.)

$14.90
$(6.50)
$1.30
$5.20


4.

A company currently makes a part that is used in the manufacture of one of its products. The company makes 18,000 units of this part each year. The company's Accounting Department reports the following per unit costs of producing the part at this level of activity:

Picture

An outside supplier has offered to produce this part and sell it to the company for $15.80 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents common fixed costs of the entire company. If the outside supplier's offer were accepted, only $26,000 of these allocated general overhead costs would be avoided.

If management decides to buy the part from the outside supplier rather than to continue making the part, what would be the annual impact on the company's overall net operating income?

Net operating income would decrease by $29,800 per year.

Net operating income would decrease by $119,800 per year.

Net operating income would decrease by $55,800 per year.

Net operating income would decrease by $81,800 per year.

5.

A company has received a request for a special order of 8,000 units of product RR25 for $27.20 each. Product RR25's unit product cost is $18.50, determined as follows:

Picture

Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product RR25 that would increase the variable costs by $7.90 per unit and that would require an investment of $31,000 in special equipment that would have no salvage value

This special order would have no effect on the company's other sales. The company has the capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by:

$(24,600)
$30,600
$(4,400)
$69,600
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