1)

Bonita Inc. has 10400 obsolete calculators, which are carried in inventory at a cost of $21500. If the calculators are scrapped, they can be sold for $1.20 each (for parts). If they are repackaged, at a cost of $15000, they could be sold to toy stores for $2.40 per unit. What alternative should be chosen, and why?

Scrap; profit is $2520 greater.

Repackage; revenue is $6500 greater than cost.

Scrap; incremental loss is $9020.

Repackage; receive profit of $9960.

2)

It costs Waterway Fields $15 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 3150 units at $19 each. Waterway has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?

decrease $4725

increase $4725

increase $59850

increase $12600