1.

Allegiance, Inc. has $131,000 of inventory that suffered minor smoke damage from a fire in the warehouse. The company can sell the goods "as is" for $41,000; alternatively, the goods can be cleaned and shipped to the firm's outlet center at a cost of $29,000. There the goods could be sold for $86,000. What alternative is more desirable and what is the relevant cost for that alternative?

a. Sell "as is," $131,000.

b. Clean and ship to outlet center, $29,000.

c. Clean and ship to outlet center, $115,000.

d. Clean and ship to outlet center, $160,000.

e. Neither alternative is desirable, as both produce a loss for the firm.

2.Lido manufactures A and B from a joint process (cost = $90,000). 6,000 pounds of A can be sold at split-off for $22 per pound or processed further at an additional cost of $28,000 and then sold for $27 per pound. If Lido decides to process A beyond the split-off point, operating income will:

a. increase by $42,000.

b. increase by $8,000.

c. increase by $2,000.

d. decrease by $8,000.

e. decrease by $42,000.

3. Laredo manufactures Nuts and Bolts from a joint process (cost = $85,000). 6,000 pounds of Nuts can be sold at split-off for $20 per pound; 17,000 pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes Laredo allocates joint costs using the relative sales value method.

The amount of joint cost allocated to Nuts would be:

a. $85,000.

b. $30,000.

c. $65,000.

d. $27,200.

e. $57,800.