3.3. Banet Company is considering the following alternatives: Alternative A Alternative B Revenues $60,000 $72,000 Variable costs 40,000 40,000 Fixed costs 12,000 18,000 What is the incremental profit? (Points : 1) $10,000 $0 $6,000 $4,000 Question 4.4. Reeling company is considering the following alternatives: Alternative 1 Alternative 2 Revenues $130,000 $130,000 Variable costs 65,000 75,000 Fixed costs 34,000 36,000 Which of the following are relevant in choosing between the alternatives? (Points : 1) Variable costs and fixed costs Revenues only Fixed costs only Variable costs only Question 5.5. It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 3,000 scales. If the special order is accepted, what will be the effect on net income? (Points : 1) $6,000 increase $6,000 decrease $9,000 decrease $45,000 increase Question 6.6. In incremental analysis, fixed costs are ordinarily considered irrelevant costs in a make-or-buy decision. Which of the following is also true? (Points : 1) costs are not relevant if they change between alternatives all costs are relevant if they change between alternatives only fixed costs are relevant only variable costs are relevant Question 7.7. Tunnel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $11 Variable overhead 5 Fixed overhead 8 Total $24 Juran Company has contacted Tunnel with an offer to sell it 5,000 of the wickets for $18 each. If Tunnel makes the wickets, variable costs are $16 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Tunnel make or buy the wickets? (Points : 1) Buy; savings = $15,000 Buy; savings = $5,000 Make; savings = $10,000 Make; savings = $5,000 Question 8.8. A company has a process that results in 24,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $160,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action? (Points : 1) Process further, the company will be better off by $16,000 Sell now, the company will be better off by $16,000 Process further, the company will be better off by $144,000 Sell now, the company will be better off by $160,000 Question 9.9. Borem Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price $225,000 $375,000 Accumulated depreciation 90,000 - 0 - Annual operating costs 300,000 240,000 If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years. The net advantage (disadvantage) of replacing the old equipment with the new equipment is: (Points : 1) $60,000 $(15,000) $(75,000) $90,000 Question 10.10. Pacific Division has the following information: Sales $1,200,000 Variable expenses 640,000 Fixed expenses 620,000 If this division is eliminated, the fixed expenses will be allocated to the company's other divisions. What is the incremental effect on net income if the division is dropped? (Points : 1) $60,000 increase $620,000 decrease $560,000 decrease $580,000 increase