1. Valber Company is considering eliminating its Phone division. The company allocates fixed costs based on sales. If the Phone division is dropped, all of its variable costs are avoidable, and $167,000 of its fixed costs are avoidable. The impact on Valbers income from eliminating the Phone division is:

	Desktops	Laptops	Tablets	Phones
Sales	$ 407,000	$ 922,500	$ 745,000	$ 992,000
Variable costs	218,000	652,000	545,000	812,000
Contribution margin	189,000	270,500	200,000	180,000
Fixed costs	88,200	191,300	155,800	212,000
Net income (loss)	100,800	79,200	44,200	(32,000)

3.

Gion Company is considering eliminating its Windows division, which reported a loss for the prior year of $89,000 as shown below.

Segment Income (Loss)
Sales	$ 1,114,000
Variable costs	979,000
Contribution margin	135,000
Fixed costs	224,000
Income (loss)	$ (89,000)

If the Windows division is dropped, all of its variable costs are avoidable, and $145,600 of its fixed costs are avoidable. The impact on Gions operating income from eliminating this business segment would be:

5

Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $24 per unit. Additional information is as follows:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 9	Overhead	$ 20,500
Direct labor	10	General and administrative	27,500
Overhead	3
General and administrative	12

Using the variable cost method, what markup percentage to variable cost should be used?

6.

Wesley Company makes bowling balls and uses the total cost method in setting product prices. Its costs for producing 10,000 bowling balls follow. The company targets a 12.5% markup on total cost. The dollar markup per unit is:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 55	Overhead	$ 230,000
Direct labor	13.00	Selling, general, and administrative	210,000
Overhead	15.00
Selling, general, and administrative	3.00

7.

Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $245,000 as shown below.

Segment Income (Loss)
Sales	$ 1,470,000
Variable costs	1,335,000
Contribution margin	135,000
Fixed costs	380,000
Income (loss)	$ (245,000)

If the Small Tools Division is dropped, all of its variable costs are avoidable, and $114,000 of its fixed costs are avoidable. The impact on Carnss income from eliminating the Small Tools Division would be:

9.

Galla Incorporated needs to determine a price for a new product. Galla desires a 25% markup on the total cost of the product. Galla expects to sell 5,000 units. Additional information is as follows:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 14	Overhead	$ 45,000
Direct labor	15	General and administrative	18,000
Overhead	13
General and administrative	19

Using the total cost method what price should Galla charge?

15.

Jaybird Company operates in a highly competitive market where the market price for its product is $100 per unit. Jaybird desires a 30% profit per unit. Jaybird expects to sell 5,000 units. Additional information is as follows:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 15	Overhead	$ 45,000
Direct labor	16	General and administrative	18,000
Overhead	14
General and administrative	20

To achieve the target cost per unit, Jaybird must reduce total expenses by how much?

16. Graham Corporation has 1,000 cartons of oranges that were harvested at a cost of $28,200. The oranges can be sold as is for $32,880. The oranges can be processed further into orange juice at an additional cost of $12,725 and be sold at a price of $49,150. The incremental income (loss) from processing the oranges into orange juice would be:

17.

Lattimer Company had the following results of operations for the past year:

Contribution margin income statement	Per Unit	Annual Total
Sales (16,200 units)	$ 12.00	$ 194,400
Variable costs
Direct materials	1.50	24,300
Direct labor	4.00	64,800
Overhead	1.00	16,200
Contribution margin	5.50	89,100
Fixed costs
Fixed overhead	1.00	16,200
Fixed selling and administrative expenses	1.40	22,680
Income	$ 3.10	$ 50,220

A foreign company offers to buy 5,400 units at $7.50 per unit. In addition to variable costs, selling these units would add a $0.25 selling expense for export fees. Lattimers annual production capacity is 26,200 units. If Lattimer accepts this additional business, the special order will yield a:

18.

Pinkin Incorporated needs to determine a price for a new phone model. Pinkin desires a 25% markup on the total cost of the phone. Pinkin expects to sell 30,000 phones. Additional information is as follows:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 27	Overhead	$ 85,000
Direct labor	52	General and administrative	65,000
Overhead	32
General and administrative	62

Using the total cost method what price should Pinkin charge?

19.

Sooky has a spotter truck with a book value of $60,000 and a remaining useful life of five years. At the end of the five years the spotter truck will have a zero-salvage value. iSooky can purchase a new spotter truck for $140,000 and receive $33,000 in return for trading in its old spotter truck. The old spotter truck has variable manufacturing costs of $95,000 per year. The new spotter truck will reduce variable manufacturing costs by $27,000 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:

20.

Granfield Company is considering eliminating its backpack division, which reported a loss for the recent year of $49,500 as shown below.

Segment Income (Loss)
Sales	$ 990,000
Variable costs	490,000
Contribution margin	500,000
Fixed costs	549,500
Income (loss)	$ (49,500)

If the backpack division is dropped, all $490,000 of its variable costs are avoidable, and $219,800 of its fixed costs are avoidable. The impact on Granfields income from eliminating this business segment would be: