21. The product V700 has been considered a drag on profits at Korbin Company for some time, and the management is considering discontinuing the product altogether. Given below is data taken from the companys accounting system in relation to the sales and the variable expenses associated with this product along with all the fixed expenses. Further investigation has revealed that $60,000 of the fixed manufacturing expenses and $36,000 of the fixed selling and administrative expenses are avoidable if the product V700 is discontinued. What is the effect on the company's overall net operating income if the product V700 is dropped?

The overall net operating income will increase by $20,000.

The overall net operating income will decrease by $20,000.

The overall net operating income will increase by $111,000.

The overall net operating income will decrease by $111,000.

None of the above.

22. Sindy Company is considering two alternatives: Alternative X and Alternative Y. The costs associated with the alternatives are given in the below table. What is the differential cost of Alternative X over Alternative Y, including all the relevant costs?

$98,000

$166,000

$244,000

$264,000

None of the above

23. Boom Company has received a request for a special order of 18,000 units of product B99 for $41 each. The product B99's unit product cost is $34, as shown in the below table. Direct labor is a variable cost. The special order will have no effect on the company's total fixed manufacturing overhead costs. The customer wants some modifications to be made to the product B99, which will increase the variable costs by $24 per unit and will also require an investment of $40,000 in special molds that will have no salvage value. This special order will have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, what is the effect on the company's overall net operating income?

The overall net operating income will decrease by $54,000.

The overall net operating income will decrease by $94,000.

The overall net operating income will decrease by $346,000.

The overall net operating income will increase $126,000.

None of the above.

24. The part S70 is used in one of Dory Companys products. The company makes 3,000 units of this part each year. The costs of producing the part at this level of activity are shown in the below table, as reported by the company's accounting department. An outside supplier has offered to produce this part and sell it to the company for $32.10 each. If this offer is accepted, the supervisor's salary and all the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no resale value or other use. The allocated general overhead represents the fixed costs of the entire company. If the outside supplier's offer is accepted, only $3,000 of these allocated general overhead costs will be avoided. If the management decides to buy the part S70 from the outside supplier rather than to continue making the part, what will be the annual impact on the company's overall net operating income? *

The overall net operating income will decrease by $5,400 per year.

The overall net operating income will decrease by $16,200 per year.

The overall net operating income will decrease by $19,200 per year.

The overall net operating income will decrease by $22,200 per year.

None of the above.

25. Superior Corporation currently has two divisions: Aluminum Division and Wood Division. Given below are the operating results for last year. Since the Wood Division has sustained a loss, the president of Superior Corporation is considering the elimination of this division. All the fixed expenses for the division can be eliminated if the division is dropped. If the Wood Division is dropped, how much higher or lower will Superior Corporation's total net operating income be for the year?

It will be higher by $10,000.

It will be lower by $40,000.

It will be higher by $50,000.

It will be lower by $100,000.

None of the above.

Item: Sales Variable Expenses Fixed Manufacturing Expenses Fixed Selling and Administrative Expenses Amount $360,000 $153,000 $142,000 $85,000 Material Costs Processing Costs Equipment Rental Occupancy Costs Alternative X $99,000 $95,000 $50,000 $20,000 Alternative Y $63,000 $61,000 $22,000 $20,000 Amount Item: Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Unit Product Cost $8 per unit 7 per unit 5 per unit 14 per unit $34 per unit Item: Direct Materials Direct Labor Variable Manufacturing Overhead Supervisor's Salary Depreciation of Special Equipment Allocated General Overhead Amount $7.70 per unit $6 per unit $8 per unit $7.60 per unit $5.90 per unit $3.30 per unit Sales Variable Expenses Contribution Margin Fixed Expenses for the Division Segment Margin Allocated Corporate Fixed Expenses Net Operating Income (Loss) Aluminum Division $600,000 310,000 290,000 110,000 180,000 100,000 $80,000 Wood Division $300,000 200,000 100,000 60,000 40,000 50,000 $(10,000)