26)Fillip Corporation makes 5,600 units of part U13 each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity:

	Per Unit
Direct materials	$9.40
Direct labor	$7.60
Variable manufacturing overhead	$10.00
Supervisor's salary	$5.70
Depreciation of special equipment	$8.80
Allocated general overhead	$8.00

An outside supplier has offered to make and sell the part to the company for $24.60 each. If this offer is accepted, the supervisor's salary and all of 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 salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $3,800 of these allocated general overhead costs would be avoided. In addition, the space used to produce part U13 would be used to make more of one of the company's other products, generating an additional segment margin of $14,600 per year for that product. What would be the impact on the company's overall net operating income of buying part U13 from the outside supplier?

	Net operating income would increase by $14,600 per year.
	Net operating income would decline by $95,200 per year.
	Net operating income would decline by $151,200 per year.
	Net operating income would increase by $63,760 per year.

27.

Young Enterprises has budgeted sales in units for the next five months as follows:

June	5,400 units
July	8,000 units
August	6,200 units
September	7,600 units
October	4,600 units

Past experience has shown that the ending inventory for each month should be equal to 12% of the next month's sales in units. The inventory on May 31 fell short of this goal since it contained only 600 units. The company needs to prepare a Production Budget for the next five months. The total number of units to be produced in July is:

	8,744 units
	8,000 units
	7,784 units
	8,216 units