1. J Inc. is considering discontinuing a product. The product costs are $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost of discontinuing the product?

A. $19,000

B. $15,000

C. $35,000

D. $39,000

2. L Co. is currently leasing for the next 5 years at $2,000 per month. L Co. pays $5,000 of property taxes per year. The company has an offer to sell the building for $75,000. Determine the best option for L Co.

A. sell; net differential income $45,000

B. sell; net differential income $75,000

C. continue to lease; net differential income $20,000

D. continue to lease; net differential income $45,000

3. Bright Times Co. is considering closing the table lamp segment. Current revenue was $78,000, with variable costs of $50,000, and fixed costs of $40,000. What is differential income or loss from the table lamp segment and should it be discontinued?

A. differential loss, $12,000; segment should be discontinued

B. differential income, $28,000; segment should be continued

C. differential loss, $90,000; segment should be discontinued

D. differential income, $78,000; segment should be continued

4. Hot Dog Express (HDE) is currently buying their buns from Buns-For-All for $. 50 a dozen. Each month they purchase 14,000 dozen. HDE is considering making their own buns for cost cutting and quality reasons. They have determined the following costs: materials, $. 20; direct labor, $. 10; variable factory overhead cost, $. 04; and total (existing) fixed costs, $3,000 per month. From an accounting point of view only, should HDE make or buy their buns?

A. make; savings of $2,240

B. buy; savings of $2,240

C. make; savings of $4,000

D. buy; savings of $760