2. Aircraft Products, a manufacturer of aircraft landing gear, makes 1,600 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $76 and fixed costs of $60. The valves could be purchased from an outside supplier at $83 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to:

Multiple Choice

• Increase by $46,400.

• Decrease by $27,200.

• Increase by $27,200.

• Decrease by $46,400.

3. If unit sales prices are $38 and variable costs are $30 per unit, how many units would have to be sold to break-even if fixed costs equal $24,000?

Multiple Choice

• 114,000 units

• 192,000 units

• 3,000 units

• 90,000 units

4. Express, Inc., is considering replacing equipment. The following data are available:

	Old Equipment				Replacement Equipment
Original cost	$	44,000			$	34,600
Disposal value now	$	7,400				0
Disposal value in 5 years		0				0
Annual cash operating costs	$	8,400			$	7,400

What are the total relevant costs of keeping the old equipment?

Multiple Choice

• $42,000.

• $9,400.

• $7,400.

• $44,000.