17-20

17. Abel Company produces three versions of baseball bats: wood, aluminum, and hard rubber. A condensed segmented income statement for a recent period follows: Wood Aluminum Hard Rubber Total Sales Contribution margin Fixed expenses Net income (loss) S 65,000 $765,000 Variable expenses 325.000 140,000 000 23,000 242,000 22,000132,000 (15.000) S110.000 500,000 $200,000 175,000 75,000 35.000 60,000 7,000 S100,000$25.000 Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped? A. $125,000 B. $105,000 C. $103,000 D. $140,000 The process of evaluating financial data that change under alternative courses of action is called A) incremental analysis. B) contribution margin analysis. 18. C. Double entry analysis. D. cost-benefit analysis. Opportunity cost is usually A) a standard cost. B) a potential benefit. 19. C. a sunk cost. D. included as part of cost of goods sold. 20. Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: $120,000 25,000 45,000 30,000 Direct Materials Direct Labor Variable Overhead Fixed Overhead If Tex's Manufacturing Company can purchase the component externally for $190,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision? a. Buy and save $5,000 b. Make and save $5,000 c. Make and save $15,000 d. Buy and save $15,000