17.

Test Company produces a component part included in its final product. A supplier has contacted the company with an offer to provide the component part for $60 per unit. In evaluating the offer, Test Company identified the following costs to produce the component.

Direct materials	$25 per unit
Direct labor	$10 per unit
Variable overhead	$15 per unit
Fixed overhead	$10,000 per month

Test Companys average monthly demand is 4,000 components per month.

Assume that 20% of the fixed overhead can be avoided if Test Company discontinues production of the component.

Determine the total relevant cost of producing the component.

Note: Give your answer using dollar signs and commas but not decimal points (cents).

Example: $12,345

18.

Test Company reported the following segmented operating results for the most recent period.

	Segment A	Segment B	Total
Sales	$500,000	$350,000	$850,000
Variable expenses	200,000	250,000	450,000
Contribution margin	300,000	100,000	400,000
Direct fixed expenses	160,000	195,000	355,000
Segment margin	$140,000	$(95,000)	45,000
Common fixed expenses			60,000
Operating income (loss)			$(15,000)

Test Company management is considering dropping Segment B. If Segment B is dropped, all of the direct fixed expenses will be eliminated.

Assume that Segment A and Segment B are complements. If Test Company drops Segment B, sales of Segment A will decrease by 10%.

Determine the amount that operating income (loss) that would be earned if Test Company drops Segment B.

Note: Give your answer using dollar signs and commas but not decimal points (cents). Give negative numbers in parentheses.

Example: $12,345 or $(12,345)

19.

Test Company produces two products from a common input: Product A and Product B. One batch of the common input yields 600 units of Product A and 200 units of Product B. The joint costs for one batch are $25,000. Product A can be sold at the split-off point for $80 per unit. Product B can be sold at the split-off point for $150 per unit. Alternatively, Product B can be processed into 120 units of Product C that will sell for $400 per unit. Additional process costs for one batch of Product C will be $5,500.

Determine the increase (decrease) in income if Product B is processed further into Product C.

overhead costs are avoidable if Test Company discontinues production of the component.

Determine the total relevant cost of producing the component.

Note: Give your answer using dollar signs and commas but not decimal points (cents). Give negative numbers in parentheses.

Example: $12,345 or $(12,345)