1) Factor Co. can produce a unit of product for the following costs:

Direct material	$	8.10
Direct labor		24.10
Overhead		40.50
Total costs per unit	$	72.70

An outside supplier offers to provide Factor with all the units it needs at $42.35 per unit. If Factor buys from the supplier, the company will still incur 70% of its overhead. Factor should choose to:

A) Buy since the relevant cost to make it is $60.55.

B) Make since the relevant cost to make it is $44.35.

C) Buy since the relevant cost to make it is $44.35.

D) Make since the relevant cost to make it is $32.20.

E) Buy since the relevant cost to make it is $32.20.

2. ) Maxim manufactures a hamster food product called Green Health. Maxim currently has 15,000 bags of Green Health on hand. The variable production costs per bag are $2.30 and total fixed costs are $15,000. The hamster food can be sold as it is for $11.00 per bag or be processed further into Premium Green and Green Deluxe at an additional cost. The additional processing will yield 15,000 bags of Premium Green and 3,500 bags of Green Deluxe, which can be sold for $10 and $8 per bag, respectively. Assuming Maxim further processes Green Health further into Premium Green and Green Deluxe, revenue from the two products would be:

A) $178,000.

B) $172,000.

C) $13,000.

D) $7,000.

E) $6,000.

3. ) Marks Corporation has two operating departments, Drilling and Grinding, and an office. The three categories of office expenses are allocated to the two departments using different allocation bases. The following information is available for the current period:

Office Expenses	Total				Allocation Basis
Salaries	$	31,000			Number of employees
Depreciation		21,000			Cost of goods sold
Advertising		41,000			Net sales

Item	Drilling			Grinding			Total
Number of employees		800			1,200			2,000
Net sales	$	330,000		$	495,000		$	825,000
Cost of goods sold	$	79,800		$	130,200		$	210,000

The amount of depreciation that should be allocated to Grinding for the current period is:

A) $21,000.

B) $25,420.

C) $7,980.

D) $13,020.

E) $41,000.