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1 . Dapper Company received $9,000 cash from the sale of a machine that had an $13,000 book value. If the company is subject to

1 . Dapper Company received $9,000 cash from the sale of a machine that had an $13,000 book value. If the company is subject to a 30% income tax rate, the net cash flow to use in a discounted-cash-flow analysis would be:

Multiple Choice

  • $10,200.

  • $2,700.

  • $6,300.

  • $9,000.

  • $7,800

2 . Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

Regular Super Total
Units 11,000 4,300 15,300
Sales revenue $ 297,000 $ 946,000 $ 1,243,000
Less: Cost of goods sold 220,000 559,000 779,000
Gross Margin $ 77,000 $ 387,000 $ 464,000
Less: Selling expenses 77,000 239,000 316,000
Operating income (loss) $ 0 $ 148,000 $ 148,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Regular and $20 per unit for Super. Variable selling expenses are $3 per unit for Regular and $20 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 20% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued?

Multiple Choice

  • $0.

  • $21,600 increase.

  • $44,000 increase.

  • $44,400 decrease.

  • None of the answers is correct.

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