1. Marigold Corp. produces 5000 units of part A12E. The following costs were incurred for that level of production:

Direct materials	$ 55000
Direct labor	160000
Variable overhead	75000
Fixed overhead	175000

If Marigold buys the part from an outside supplier, $20000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $65, net income will increase (decrease) by

[ a. ($15,000) b. $85,000 c. $130,000 d. ($35,000) ]

2. Oriole Company is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $24 and Oriole would sell it for $54. The cost to assemble the product is estimated at $18 per unit and the company believes the market would support a price of $71 on the assembled unit. What decision should Oriole make?

[ a. Process further, the company will be better off by $23 per unit. / b. Process further, the company will be better off by $12 per unit. / c. Sell before assembly, the company will be better off by $1 per unit. / d. Sell before assembly, the company will be better off by $17 per unit. ]

3. Swifty Corporation spent $4400 to produce Product 89, which can be sold as is for $5500, or processed further incurring additional costs of $1650 and then be sold for $7700. Which amounts are relevant to the decision about Product 89?

[ a. $5500, 1650, 7700 / b. 4400, 5500, 1650 / c. 4400, 5500, 1650, 7700 / d. 4400, 5500, 7700 ]

4. Concord Corporation produces face cream. Each bottle of face cream costs $13 to produce and can be sold for $15. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $16 each. Concord Corporation could sell the sunscreen bottles for $23 each.

[ a. Face cream must be processed further because it increases profit by $2 each. / b. Face cream must be processed further because its profit is $7 each. / c. Face cream must not be processed further because costs increase more than revenue. / d. Face cream must not be processed further because it decreases profit by $6 each. ]

5. Bonita Industries produced 126000 units in 60000 direct labor hours. Production for the period was estimated at 138000 units and 69000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at

[ a. 60000 and 60000 hours, b. 72000 and 69000 hours, c. 69000 and 60000 hours, d. 72000 and 60000 hours ]

6. At 14000 direct labor hours, the flexible budget for indirect materials is $28000. If $30400 are incurred at 14400 direct labor hours, the flexible budget report should show the following difference for indirect materials:

[ a. 1600 unfavorable, b. 2400 unfavorable, c. 2400 favorable, d. 1600 favorable ]

7. The current controllable margin for Henry Division is $138000. Its current operating assets are $300000. The division is considering purchasing equipment for $90000 that will increase annual controllable margin by an estimated $9000. If the equipment is purchased, what will happen to the return on investment for Henry Division?

[ a. increase of 6.50%, b. decrease of 14.30%, c. decrease of 8.30%, d. decrease of 8.60% ]