3 Assume a retailing company has two departments - Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $800,000 320,000 480,000 400,000 $ 80,000 Department A Department B $350,000 $450,000 120,000 200,000 230,000 250,000 140,000 260,000 $ 90,000 $(10,000) The company says that $110,000 of the fixed expenses being charged to Department Bare sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B? Multiple Choice O $(148,000) O $(152,000) O $(147,600) O $(127,600) 4 Assume that each year o company normally produces and sells 80,000 units of its only product for $40 per unit. The company's average unit costs at this level of activity are given below. Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expenses Fixed selling expenses Total cost per unit $ 9.50 10.00 2.80 5.00 1.70 4.58 $33.50 One of the company's raw material suppliers is experiencing a shortage that will last for three months. The company can respond to this shortage in one of two ways over the next three months. It has enough raw materials on hand to enable it to continue operating at 25% of normal output The second option is to close down the plant for three months. Under this option, the company could avoid 40% of the foed manufacturing overhead costs that it would ordinarily incur during this three-month period. Furthermore, its fixed selling expenses would continue at 30% of their normal levels during the three-month closure. What is the financial advantage (disadvantage) of closing the plant for three months? Multiple Choice O $(18,000) O O $28,000 O $(13,000) O $23,000 5 Assume a company is considering buying 10.000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40 per unit. The company's accounting system reports the following costs of making the part Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead, traceable Fixed manufacturing overhead, allocated Total cost Per Unit $18 12 2 8 4 $44 10,000 Units per Year $180,000 120,000 20,000 80,000 40,000 $440,000 Three-fourth's of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10.000 units from the supplier? Multiple Choice $(60,000) O $20,000 O $(20,000) $40,000