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? *

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

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

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

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

e- 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?

a- It will be higher by $10,000.

b- It will be lower by $40,000.

c- It will be higher by $50,000.

d- It will be lower by $100,000.

e- None of the above.

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)