1. The Northern Division of Southwest Clothing Inc. forecasts (has budgeted) the following income statement for the upcoming year: Sales $850,000 Variable Costs (520,000) Contribution Margin 330,000 Fixed Costs (480,000)

Operating loss ($150,000) Unfortunately, every other division in the company is also expecting an operating loss for the coming year. The company's management is considering shutting down the Northern Division and has determined that $310,000 of the $480,000 Fixed Costs shown would be eliminated if that happens. If the Northern Division is shutdown, what is the change (impact) in Southwest's forecast operating results?

a. Operating profit will increase by $330,000

b.	Operating loss will decrease by $20,000

c.	Operating loss will increase by $20,000

d.	Operating profit will decrease by $330,000

2. Neter Co. can further process Product M to produce Product N. Product M is currently selling for $23 per pound and costs $14.60 per pound to produce. Product N would sell for $38 per pound and would require an additional cost of $9.75 per pound to produce. What is the differential revenue per pound of producing Product M?

a.

$15

b.

$9.75

c.

$23

d.

$38

3. San Pedro Table Cloth received an offer from an exporter for 10,000 units of product at $16 per unit. The acceptance of the offer will not affect normal production or regular sales prices. The following data are available:

Regular unit sales price	$20
Unit manufacturing costs:
Variable	13
Fixed	1

What is the expected increase in variable manufacturing costs from the acceptance of the offer?

a.

$160,000

b.

$200,000

c.

$130,000

d.

$140,000

4. Which of the following is relevant to a company's decision to accept a special order at a lower sale price from a

a.	variable cost of production

b.	cost of the warehouse update last year

c.	cost of travel to convention next year

d.	fixed cost