1. A department in a company should be dropped if:

	A.	lost contribution margin is more than eliminated fixed expenses
	B.	lost contribution margin is less than eliminated fixed expenses
	C.	lost sales revenue is more than eliminated fixed expenses
	D.	lost sales revenue is less than eliminated fixed expenses

2.

Which of the following factors should be considered when deciding whether a part should be purchased from an outside supplier or not

	A.	The variable cost of making the part
	B.	The purchase price of the part
	C.	The opportunity cost of using facilities to make the part
	D.	All of the above

3.

Sentinel Inc. manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $50,000 per year. The company allocates these costs to the joint products on the basis of their total sales value at the split-off point. These sales values are as follows: Product X, $25,000; Product Y, $45,000; and Product Z, $30,000. Each product may be sold at the split-off point or processed further. The additional processing costs and the sales value after further processing for each product (on an annual basis) are as follows.

	Product X	Product Y	Product Z
Additional processing costs	$10,000	$32,000	$6,000
Sales value (after further processing)	$40,000	$75,000	$37,000

Which product or products should be sold at the split-off point?

	A.	Product X
	B.	Product Y
	C.	Product Z
	D.	None of the above

4.

Consider the following production and cost data for two products, X and Y:

	Product X	Product Y
Contribution margin per unit	$520	$480
Machine set-ups needed per unit	40 set-ups	32 set-ups

The company can only perform 260,000 machine set-ups each period due to limited skilled labor and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?

	A.	$3,380,000
	B.	$3,900,000
	C.	$3,640,000
	D.	$7,280,000