21-22

A study has been conducted to determine if product A should be dropped. Sales of the product total $400.000 per year, variable expenses total $270,000 per year. Fixed expenses charged to the product total $160,000 per year. The company estimates that $70,000 of these fixed expenses are not avoidable even if the product is product is dropped. If Product A is dropped, the company's overall net operating income would: A. decrease by $40,000 per year B. increase by $40,000 per year C. decrease by $30,000 per year D. increase by $30,000 per year Hoang Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. A. RP, KI, LH B. RP, LH, KI C. KI, RP, LH D. LH, RP, KI Oakland Corporation makes 30,000 motors to be used in the productions of its power lawn mowers. The average cost per motor at this level of activity is as follows: This motor has recently become available from an outside supplier for $25 per motor. If Oakland decides not to make the motors, none of the fixed manufacturing overhead would be avoidable and there would be no other use for the facilities. Oakland decides to continue making the