25.

Allen's Ark sells 2000 canoes per year at a sales price of $450 per unit. Allen's sells in a highly competitive market and uses target pricing. The company has calculated its target full product cost at $740,000 per year. Total variable costs are $330,000 per year and cannot be reduced. Assume all products produced are sold. What are the target fixed costs?

Select one:

A. $330,000

B. $160,000

C. $900,000

D. $410,000

27.

Protector, Inc. has two product linesbatting helmets and football helmets. The income statement data for the most recent year is as follows:

?	Total	Batting Helmets	Football Helmets
Sales revenue	$930,000	$600,000	$330,000
Variable costs	(540,000)	(250,000)	(290,000)
Contribution margin	$390,000	$350,000	$40,000
Fixed costs	(160,000)	(70,000)	(90,000)
Operating income (loss)	$230,000	$280,000	$(50,000)

Assuming the football helmets line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the line is rented for $100,000 per year, how will operating income be affected?

Select one:

A. Operating income will decrease by $40,000.

B. Operating income will increase by $40,000.

C. Operating income will decrease by $60,000.

D. Operating income will increase by $60,000.

29.

Fastec Automobile Company fabricates automobiles. Each vehicle includes one transfer case, which is currently made in-house. Details of the transfer case fabrication are as follows:

Volume	900	units per month
Variable cost per unit	$6	per unit
Fixed costs	$16,000	per month

A Korean factory has offered to supply Fastec with ready-made units for a price of $13 per transfer case. Assume that Fastec's fixed costs are unavoidable, but that Fastec could use the vacated production facilities to earn an additional $9500 of profit per month. If Fastec decides to outsource, monthly operating income will ________.

Select one:

A. decrease by $26,600

B. increase by $9500

C. decrease by $16,000

D. increase by $3200