3.

Gion Company is considering eliminating its Windows division, which reported a loss for the prior year of $89,000 as shown below.

Segment Income (Loss)
Sales	$ 1,114,000
Variable costs	979,000
Contribution margin	135,000
Fixed costs	224,000
Income (loss)	$ (89,000)

If the Windows division is dropped, all of its variable costs are avoidable, and $145,600 of its fixed costs are avoidable. The impact on Gions operating income from eliminating this business segment would be:

5

Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $24 per unit. Additional information is as follows:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 9	Overhead	$ 20,500
Direct labor	10	General and administrative	27,500
Overhead	3
General and administrative	12

Using the variable cost method, what markup percentage to variable cost should be used?

6.

Wesley Company makes bowling balls and uses the total cost method in setting product prices. Its costs for producing 10,000 bowling balls follow. The company targets a 12.5% markup on total cost. The dollar markup per unit is:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 55	Overhead	$ 230,000
Direct labor	13.00	Selling, general, and administrative	210,000
Overhead	15.00
Selling, general, and administrative	3.00

7.

Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $245,000 as shown below.

Segment Income (Loss)
Sales	$ 1,470,000
Variable costs	1,335,000
Contribution margin	135,000
Fixed costs	380,000
Income (loss)	$ (245,000)

If the Small Tools Division is dropped, all of its variable costs are avoidable, and $114,000 of its fixed costs are avoidable. The impact on Carnss income from eliminating the Small Tools Division would be:

9.

Galla Incorporated needs to determine a price for a new product. Galla desires a 25% markup on the total cost of the product. Galla expects to sell 5,000 units. Additional information is as follows:

Variable Costs per Unit		Fixed Costs (total)
Direct materials	$ 14	Overhead	$ 45,000
Direct labor	15	General and administrative	18,000
Overhead	13
General and administrative	19

Using the total cost method what price should Galla charge?