31.) Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed overhead applied will continue regardless of which decision option is chosen. The following per-unit cost information to make the part by Kingston is available:

Direct materials	$	13
Direct labor		52
Variable overhead		26
Fixed overhead applied		33
	$	124
Cost to buy the part from Utica Company	$	61

In deciding whether to make or buy the part, Kingston's total relevant cost to make the part would be:

Multiple Choice

• $904,000.

• $1,042,000.

• $610,000.

• $1,240,000.

• Some amount other than these choices.

32.)The Blade Division of Dana Company produces hardened steel blades. Approximately one-third of the Blade Division's output is sold to the Lawn Products Division of Dana; the remainder is sold to outside customers. Blade Division's estimated sales and cost data for the year ending June 30^th are as follows:

	Sales to Lawn Products Division				Sales to Outsiders
Revenue	$	31,500			$	84,000
Variable costs		21,000				42,000
Fixed costs		6,000				28,500
Gross margin	$	4,500			$	13,500
Unit sales		21,000				42,000

The Lawn Products Division has an opportunity to purchase, on a continual basis, 10,000 blades (of identical quality) from an outside supplier, at a cost of $1.50 per unit. Assume that the Blade Division cannot sell any additional products to outside customers. Assume, too, that there are no short-term avoidable fixed costs. Based solely on short-term financial considerations, should Dana allow its Lawn Products Division to purchase the blades from the outside supplier, and why?

Multiple Choice

• Yes, because buying the blades would save Dana Company $3,000.

• No, because making the blades would save Dana Company $4,000.

• Yes, because buying the blades would save Dana Company $5,000.

• No, because making the blades would save Dana Company $5,000.

33.) Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years. The old machine has a net book value (NBV) of $58,000 and still has five years of useful life remaining. The old machine has a current market value of $5,800, but is expected to have no market value after five years. The variable operating costs and depreciation expenses (straight-line basis) are $132,000 per year. The new machine will cost $99,000, has an estimated useful life of five years with zero disposal value after five years, and an annual operating expense of $110,000 (including straight-line depreciation). Considering the five years in total and ignoring the time value of money and income taxes, what is the difference in total relevant costs for the two decision alternatives (keep vs. replace)?

Multiple Choice

• $0.

• $42,800.

• $52,800.

• $57,800.

• $67,800.

34.) Regis Company manufactures plugs at a cost of $38 per unit, which includes $10 of fixed overhead. Regis needs 30,000 of these plugs annually (as part of a larger product it produces). Orlan Company has offered to sell these units to Regis at $34 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead cost will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs.

If Regis Company purchases the plugs but does not rent the unused facility, the company would:

Multiple Choice

• Save $4.00 per unit.

• Lose $7.00 per unit.

• Save $3.00 per unit.

• Lose $4.00 per unit.

• Save $2.00 per unit.

36.) Pique Corporation wants to purchase a new machine for $360,000. Management predicts that the machine can produce sales of $220,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $78,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique's combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the present value payback period, rounded to one-tenth of a year? (Note: PV factors for 10% are as follows: year 1 = 0.909; year 2 = 0.826; year 3 = 0.751; year 4 = 0.683; year 5 = 0.621; the PV annuity factor for 10%, 5 years = 3.791. Assume that annual after-tax cash inflows occur at year-end.)

Multiple Choice

• 2.5 years.

• 3.0 years.

• 3.3 years.

• 3.6 years.

• 4.0 years.