1. Kevin Jewelry Company sells its product for $70 per unit. Variable manufacturing costs per unit are $20, and fixed manufacturing costs at the normal operating level of 5,000 units are $35,000. Variable expenses are $8 per unit sold. Fixed administration expenses total $40,000. Kevin Jewelry Company had no beginning inventory in 2018. During 2018, the company produced 5,000 units and sold 2,000. What would the net income be for Kevin Jewelry Company in 2018 using both variable costing and absorption costing?

	A.	Variable costing $30,000; Absorption costing $30,000
	B.	Variable costing $9,000; Absorption costing $30,000
	C.	Variable costing $21,000; Absorption costing $9,000
	D.	Variable costing $30,000; Absorption costing $9,000

2. Johnson and Johnson Company is considering a new drilling machine for its production plant to replace an old drilling machine that originally cost $10,000 and has $7,000 of accumulated depreciation. The new machine can be purchased at a cash cost of $16,000, but the distributor of the new drilling machine has offered to take the old machine in as a trade-in, thereby reducing the cost of the new machine to $14,000. Based only on this information, calculate the total relevant cost of acquiring the new machine.

	A.	$16,000, or the gross cost of the new machine minus the $1,000 loss on disposing of the old machine
	B.	$14,000, or the net cash paid to the distributor
	C.	$14,000, or the net cash paid plus the book value ($3,000) of the old machine
	D.	$16,000, or the gross cost of the new machine

3. Soda Company makes three products (Orange Soda, Cream Soda, and Cherry Soda), all of which use a very rare ingredient called Nutra Sugar. Soda Company can purchase only 500 ounces of Nutra Sugar per month from a South American source. Below are data for the three products:

	Orange	Cream	Cherry
Unit selling price	$40	$32	$50
Unit variable cost	10	20	30
Unit contribution margin	$30	$12	$20
Nutra Sugar (ounces per unit)	10	15	20

How should Soda Company allocate the 500 ounces of Nutra Sugar, assuming it can sell unlimited quantities of all three produces?

	A.	All 500 ounces should be allocated to Orange Soda.
	B.	All 500 ounces should be allocated to Cream Soda.
	C.	All 500 ounces should be allocated to Cherry Soda.
	D.	None of the above