1.

Below are details about Corbin Production Company's departments. Machine Care is a service department. If allocated machine care cost is based on floor space occupied by each of the other departments, compute the amount of machine care cost allocated to the Welding Department. (Do not round your intermediate computations.)

Department	Direct Expenses	Square Feet	Employees
Machine Care	$ 18,000	750	7
Welding	24,000	1,250	3
Fabrication	64,000	2,250	7
Packing	2,250	2,500	7

	A.	$3,750.
	B.	$3,474.
	C.	$6,000.
	D.	$2,269.
	E.	$18,000.

2.

Newcastle Manufacturing sell leaf blowers in a competitive market. Newcastle's target profit is 20% of the selling price and Newcastle expects to sell each leaf blower for $355. Using the target cost method, the highest that Newcastle's cost per unit can be is:

	A.	$220.
	B.	$284.
	C.	$204.
	D.	$276.
	E.	$71.

2.

Van Dorn Company has 3,000 faulty units of merchandise that already cost $62 each to manufacture. A salvage company will purchase the faulty units as is for $22 each. The head of Van Dorn's production department estimates that the faulty units can be remedied for $43 per unit. If the units are remedied they can be sold at a market price of $98. The $62 per unit is a(n):

	A.	Incremental cost.
	B.	Sunk cost.
	C.	Opportunity cost.
	D.	Out-of-pocket cost.
	E.	Period cost.

3.

Gaston Industries is considering eliminating its Landscaping department. The company allocates fixed costs based on department sales. If the Landscaping department is dropped, all of its variable costs are avoidable, and $116,000 of its fixed costs are avoidable. The impact on Gaston's operating income from eliminating the Landscaping department would be:

	Patio	Deck	Landscaping
Sales	$ 675,000	$ 968,000	$ 740,000
Variable costs	388,900	430,000	665,800
Contribution margin	286,100	538,000	74,200
Fixed costs	263,200	351,500	311,400
Net income (loss)	22,900	186,500	(237,200)

	A.	$54,000 increase
	B.	$18,000 increase
	C.	$41,800 decrease
	D.	$41,800 increase
	E.	$5,200 decrease