1.)

A company has two departments, Y and Z that incur wage expenses. An analysis of the total wage expense of $30,000 indicates that Dept. Y had a direct wage expense of $4,200 and Dept. Z had a direct wage expense of $6,800. The remaining expenses are indirect and analysis indicates they should be allocated evenly between the two departments. Departmental wage expenses for Dept. Y and Dept. Z, respectively, are:

$13,700; $16,300.

$16,300; $13,700.

$15,000; $15,000.

$4,200; $6,800.

$9,500; $9,500.

2.)

Granfield Company has a piece of manufacturing equipment with a book value of $43,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,700. Granfield can purchase a new machine for $127,000 and receive $22,700 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,700 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:

$25,500 increase

$78,800 decrease

$20,800 decrease

$54,450 increase

$25,500 decrease

3.)

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $2.20 per unit. Bluebird currently produces and sells 75,000 units at $6.20 each. This level represents 80% of its capacity. Production costs for these units are $3.50 per unit, which includes $1.85 variable cost and $1.65 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

$33,000 increase.

$5,250 increase.

$27,750 increase.

$19,500 decrease.

$27,750 decrease.

4.)

Lattimer Company had the following results of operations for the past year:

Sales (15,000 units at $12.40)		$186,000
Variable manufacturing costs	$103,500
Fixed manufacturing costs	27,000
Selling and administrative expenses (all fixed)	42,000	(172,500)
Operating income		$13,500

A foreign company whose sales will not affect Lattimer's market offers to buy 5,800 units at $8.30 per unit. In addition to existing costs, selling these units would add a $0.33 selling cost for export fees. If Lattimer accepts this additional business, the special order will yield a:

$6,206 profit.

$8,120 profit.

$4,234 loss.

$2,320 loss.

$10,034 loss.

5.)

Chang Industries has 2,500 defective units of product that have already cost $14.50 each to produce. A salvage company will purchase the defective units as they are for $5.50 each. Chang's production manager reports that the defects can be corrected for $5.50 per unit, enabling them to be sold at their regular market price of $22.00. The incremental income or loss on reworking the units is:

$27,500 loss.

$27,500 income.

$13,750 loss.

$41,250 income.

$41,250 income.