Question
3.A company has the choice of either selling 1,000 unfinished units as is or completing them. The company could sell the unfinished units as is
3.A company has the choice of either selling 1,000 unfinished units as is or completing them. The company could sell the unfinished units as is for $4,000. Alternatively, it could complete the units for an additional cost of $4,500 and then sell the completed units for $8,000. If the company completes the units, what is the impact on income?
Multiple Choice
Income will increase by $8,000.
Income will decrease by $500.
Income will decrease by $4,500.
Income will increase by $500.
Income will increase by $4,000.
5.
Valdez Company is considering eliminating its kitchen division, which reported an operating loss of $62,000 for the past year as shown below.
Segment Income (Loss) | |
---|---|
Sales | $ 1,210,000 |
Variable costs | 902,000 |
Contribution margin | 308,000 |
Fixed costs | 370,000 |
Income (loss) | $ (62,000) |
If the kitchen division is dropped, all $902,000 of its variable costs are avoidable, and $222,000 of its fixed costs are avoidable. The impact on Valdez's income from eliminating this business segment would be:
Multiple Choice
$308,000 decrease
$86,000 increase
$319,200 decrease
$308,000 increase
$86,000 decrease
6.
Riener Hospital has an x-ray machine with a book value of $60,000 and a remaining useful life of three years. At the end of the three years the equipment will have a zero-salvage value. Reiner can sell the old machine now for $32,000 and can purchase a new machine for $145,000. The old machine has variable manufacturing costs of $50,000 per year. The new machine will reduce variable manufacturing costs by $27,000 per year over the three-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
Multiple Choice
$22,000 increase
$52,000 increase
$18,000 decrease
$76,000 increase
$32,000 decrease
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