17.)

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 $162,000 of its fixed costs are avoidable. The impact on Valbers income from eliminating the Phone division is:

	Desktops	Laptops	Tablets	Phones
Sales	$ 392,000	$ 907,500	$ 730,000	$ 987,000
Variable costs	213,000	647,000	540,000	807,000
Contribution margin	179,000	260,500	190,000	180,000
Fixed costs	83,200	186,300	150,800	207,000
Net income (loss)	95,800	74,200	39,200	(27,000)

Multiple Choice

• $17,000 decrease

• $162,000 increase

• $162,000 decrease

• $27,000 increase

• $18,000 decrease

18.)

Bluebird Manufacturing has received a special one-time order for 15,600 bird feeders at $3.60 per unit. Bluebird currently produces and sells 75,000 units at $7.60 each. This level represents 80% of its capacity. Production costs for these units are $4.10 per unit, which includes $2.85 of variable costs and $1.85 of fixed costs. If the special offer is accepted, there will be no incremental fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

Multiple Choice

• $56,160 increase.

• $11,700 increase.

• $44,460 increase.

• $7,800 decrease.

• $44,460 decrease.

19.)

Chang Industries has 1,500 defective units of product that already cost $44 each to produce. A salvage company will purchase the defective units as is for $20 each. Chang's production manager reports that the defects can be corrected for $36 per unit, enabling them to be sold at their regular market price of $36. The $44 per unit is a:

Multiple Choice

• Incremental cost.

• Sunk cost.

• Out-of-pocket cost.

• Opportunity cost.

• Period cost.

20.)

Jaybird Company operates in a highly competitive market where the market price for its product is $70 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	$ 9	Overhead	$ 45,000
Direct labor	10	General and administrative	18,000
Overhead	8
General and administrative	14

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

Multiple Choice

• $24,500

• $13,500

• $33,000

• $30,000

• $23,000