1. Sammy Company is considering eliminating its Commercial division. The company allocates fixed costs based on division sales. If the Commercial division is dropped, all of its variable costs are avoidable, and $106,000 of its fixed costs are avoidable.

                                      Garden       Farm         Commercial 

Sales                         $ 680,000    $ 938,000    $ 710,000

Variable costs            378,900      420,000       655,800

Contribution margin  301,100   518,000         54,200

Fixed costs                  253,200       341,500      271,500

Net income (loss)   47,900             176,500    (217,300)

The impact on Sammy's operating income from eliminating the commercial division would be:

2. Sooky has a spotter truck with a book value of $49,000 and a remaining useful life of five years. At the end of the five years the spotter truck will have a zero-salvage value. Sooky can purchase a new spotter truck for $129,000 and receive $31,900 in return for trading in its old spotter truck. The old spotter truck has variable manufacturing costs of $84,000 per year. The new spotter truck will reduce variable manufacturing costs by $25,900 per year over the five-year life of the new spotter truck. The total increase or decrease in income by replacing the current spotter truck with the new truck is:

3. Bluebird Manufacturing has received a special one-time order for 15,900 bird feeders at $3.90 per unit. Bluebird currently produces and sells 75,000 units at $7.90 each. This level represents 80% of its capacity. Production costs for these units are $4.40 per unit, which includes $3.15 of variable costs and $2.15 of fixed costs. If the special offer is accepted, there will be no incremental fixed cost. If Bluebird accepts this additional business, the effect on income will be: