1.Diamond Company has three product lines, A, B, and C. The following financial information is available:

Item	Product Line A				Product Line B				Product Line C
Sales	$	40,000			$	70,000			$	17,000
Variable costs	$	24,000			$	37,000			$	10,625
Contribution margin	$	16,000			$	33,000			$	6,375
Fixed costs:
Avoidable	$	4,800			$	11,500			$	4,500
Unavoidable	$	3,500			$	7,000			$	2,500
Pre-tax operating income	$	7,700			$	14,500			$	(625	)

If Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, pre-tax operating income for the company will likely:

Multiple Choice

• Be unchangedthe two effects cancel each other out.

• Increase by $2,925.

• Increase by $4,125.

• Increase by $6,825.

• Increase by some other amount.

2.Lucky Company's direct labor information for the month of February is as follows:

Actual direct labor hours worked (AQ)		63,440
Standard direct labor hours allowed (SQ)		65,000
Total payroll for direct labor	$	793,000
Direct labor efficiency variance	$	17,940

The standard direct labor rate per hour (SP) for February (rounded to two decimal places) was:

Multiple Choice

• $11.50.

• $12.20.

• $12.50.

• $13.50.

• $13.80.