1. Brittany Furniture manufactures two products: Futons and Recliners. The following data are available:

	futons	recliners
sales price	$500	$480
variable costs	$325	$120

The company can manufacture two futons per machine hour and one recliner per machine hour. The company's production capacity is 900 machine hours per month. To maximize profits, what product and how many units should the company produce in a month?

Select one:

a. 900 recliners

b. 1,800 futons and 900 recliners

c. 1,800 futons

d. 700 futons and 360 recliners

2. Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $3.00 per unit, and avoid 30% of the fixed costs.

If Harvey Automobiles makes the part, how much will its operating income be?

Select one:

a. $42,000 greater than if the company bought the part

b. $42,000 less than if the company bought the part

c. $78,000 greater than if the company bought the part

d. $78,000 less than if the company bought the part

3. Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs.

If Cuyahoga Valley Bicycles buys the part, what is the most Cuyahoga Valley Bicycles can spend per unit so that operating income equals the operating income from making the part?

Select one:

a. $1.33

b. $2.26

c. $4.64

d. $2.33