1.- The Skywalker Company uses 5,000 units of part R2SD2 each year. The full manufacturing cost of one unit of part R2D2 at this volume is:

Direct materials	$ 5.00
Direct labor	7.50
Variable manufacturing overhead	3.00
Average fixed manufacturing overhead	2.00
Total	$17.50

An outside supplier has offered to sell Belmont unlimited quantities of part R2D2 at a unit cost of $17.00. If Skywalker accepts this offer, it can eliminate 60 percent of the fixed costs assigned to part R2D2. Furthermore, the space devoted to the manufacture of part R2D2 can be rented to another company for $10,000 per year.

Determine in dollars, the increase or decrease of annual profits from Skywalker accepting the offer of the outside supplier.

2.- The Make-it-Great-Again Manufacturing Company applies factory overhead based on direct labor-hours. At the beginning of the year, the Company estimated that factory overhead costs would total $840,000, and 120,000 direct labor-hours would be required for the periods estimated level of production. For the current year, actual manufacturing overhead costs of $780,000 were incurred, and 110,000 direct labor hours were used.

1. Make-it-Greats predetermined overhead rate for the year was:

1. Total factory overhead applied during the year was:

1. By how much did Make-it-Great over or under apply overhead during the year?