1. Aircraft Products, a manufacturer of aircraft landing gear, makes 2,900 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $61 and fixed costs of $65. The valves could be purchased from an outside supplier at $68 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to:

• Increase by $92,800.

• Decrease by $92,800.

• Increase by $55,100.

• Decrease by $55,100.

2. Ross Corporation makes all sales on account. The June 30th balance sheet balance in its accounts receivable is $330,000, of which $205,000 pertain to sales that were made during June. Budgeted sales for July are $1,180,000. Ross collects 75% of sales in the month of sale; 10% in the following month; and the final 15% in the second month after the sale.

• $1,090,000

• $1,030,500

• $418,000

• $924,250

3. On October 1 of the current year, Molloy Corporation prepared a cash budget for October, November, and December. All of Molloy's sales are made on account. The following information was used in preparing estimated cash collections:

August sales (actual)	$ 31,000
September sales (actual)	$ 41,000
October sales (estimated)	$ 28,000
November sales (estimated)	$ 61,000
December sales (estimated)	$ 51,000
Approximately 65% of all sales are collected in the month of the sale, 20% is collected in the following month, and 15% is collected in the month thereafter.

Budgeted collections from customers in October total:

• $100,000.

• $40,850.

• $31,050.

• $26,400.

4a. The following information is from the manufacturing budget and budgeted financial statements of Altman Corp.:

Direct materials inventory, 1/1	$ 82,000
Direct materials inventory, 12/31	$ 98,000
Direct materials budgeted for use during year	$ 340,000
Accounts payable to suppliers, 1/1	$ 50,000
Accounts payable to suppliers, 12/31	$ 60,000

For the year, budgeted purchases of direct materials amounted to:

Multiple Choice

• $346,000.

• $324,000.

• $356,000.

• $366,000.

4b. For the year, budgeted cash payments to suppliers amounted to:

Multiple Choice

• $356,000.

• $346,000.

• $366,000.

• $324,000.