1. The Bash Company has two divisionsOffice and Home . The divisions have the following revenues and expenses: Office Home Sales 800,000 900,000 Variable costs (280,000) (200,000) Direct fixed costs (430,000) (320,000) Allocated corporate costs (120,000) (250.000) Net income (loss) (30,000) 130,000 The management at Bash is pondering the elimination of the Office Division. If the Office Division were eliminated, its direct fixed costs could be avoided, but its total corporate costs would not be affected. Given these data, the elimination of the Office Division would result in an overall company net income of: a. $100,000. c. $(300,000). b. $130,000. d. $10,000. 2. Benoit Company produces three products, D, E, and F. Cost and revenue characteristics of the three products follow (per unit): Product . D E F Selling price $40 $25 $37 Less variable expenses: Direct materials 12 8 6 Labor and overhead 13 9 19 Total variable expenses 25 17 25 Contribution margin $15 $ 8 $12 Contribution margin ratio 40% 25% 30% Demand for the companys products is very strong, with far more orders on hand each month than the company has raw materials available to produce. The same material is used in each product. The material costs $2 per pound, with a maximum of 8,000 pounds available each month. In what order should the company fill the demand for the three products? a. D,E,F b. E.D.F c. F,D,E d. E,F,D Questions 3 and 4 refer to the following: The Munsen Company produces a single product called a Doodad. Munsen has the capacity to produce 50,000 Doodads each year. If Munsen produces at capacity, the per unit costs to produce and sell one Doodad are as follows: Direct materials $24 Direct labor 15 Variable factory overhead 9 Fixed factory overhead 6 Variable selling expense 8 Fixed selling expense 7 The regular selling price for one Doodad is $75. A special order has been received by Munsen from Shoel Company to purchase 8,000 Doodads during 2015. If this special order is accepted, the variable selling expense will be reduced by 50%. However, Munsen will have to purchase a specialized machine to engrave the Shoel name on each Doodad in the special order. This machine will cost $24,000 and it will have no use after the special order is filled and no resale value. All other fixed costs will be unaffected by the special order. 3. Assume that Munsen can only sell 42,000 units of Doodads to regular customers during 2015. What is the relevant cost per unit of producing the special order for Shoel? a. $51.00 b. $69.00 c. $55.00 d. $58.00 4. Assume Munsen can sell 44,000 units of Doodads to regular customers during 2015. If Shoel Company offers to buy the special order units at $69 per unit, the effect of accepting the special order on Munsens net income for 2015 will be a: a. $106,000 increase. b. $112,000 increase. c. $74,000 increase. d. $88,000 increase. 5. Manfield Co. is considering the sale of Product X, created from a joint process. Joint processing costs up to the split-off point allocated to Product X are $16,000. Product X can be sold at the split-off point for $25,000. Alternatively, Manfield can process Product X further at a cost of $7,000 and sell the the product for $35,000 after further processing. The dollar advantage or disadvantage of a decision to further process Product X would be: a. advantage of $12,000 b. disadvantage of $7,000 c. advantage of $3,000 d. disadvantage of $2,000