1. Upscale Dishwear manufactures two products, salad plates and platters, from a joint process. Salad plates are allocated $7,500 of the total joint costs of $25,000. There are 3,000 salad plates produced and 3,000 platters produced each year. Salad plates can be sold at the split-off point for $12 per unit, or they can be hand painted for additional processing costs of $8,400 and sold for $16 for each deluxe salad plate. If the salad plates are processed further and made into deluxe plates, the effect on operating income would be:

Select one:

a. $36,000 net increase in operating income.

b. $3,600 net decrease in operating income.

c. $36,000 net decrease in operating income.

d. $3,600 net increase in operating income.

2. Moon Appliance manufactures a variety of appliances which all use Part B89. Currently, Moon Appliance manufactures Part B89 itself. It has been producing 9,000 units of Part B89 annually. The annual costs of producing Part B89 at the level of 9,000 units include:

direct materials	$3.00
direct labor	$8.00
variable manufacturing overhead	$4.00
fixed manufacturing overhead	$3.00
total cost	$18.00

All of the fixed manufacturing overhead costs would continue whether Part B89 is made internally or purchased from an outside supplier. Assume Moon Appliance can purchase 9,000 units of the part from the Nadal Parts Company for $20.00 each, and the facilities currently used to make the part could be used to manufacture 7,000 units of another product that would have a $6 per unit contribution margin. If no additional fixed costs would be incurred, what should Moon Appliance do?

Select one:

a. Make the new product and buy the part to earn an extra $1.00 per unit contribution to profit.

b. Make the new product and buy the part to earn an extra $4.00 per unit contribution to profit.

c. Continue to make the part to earn an extra $3.00 per unit contribution to profit.

d. Continue to make the part to earn an extra $8.00 per unit contribution to profit.

3. Part P40 is a part used in the production of air conditioners at Jackson Corporation. The following costs and data relate to the production of Part P40:

number of parts produced annually	22,000
fixed costs	$40,000
variable costs	$66,000
total cost to produce	$106,000

Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit. If they purchase from the outside supplier, 50% of the fixed costs would be avoided. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $2,000 profit. If Jackson Corporation makes the part, what will its operating income be?

Select one:

a. $5,500 less than if the company bought the part

b. $5,500 greater than if the company bought the part

c. 9,500 greater than if the company bought the part

d. $111,500 greater than if the company bought the part