7.)

Carns Company is considering eliminating its Small Tools Division, which reported a loss for the prior year of $215,000 as shown below.

Segment Income (Loss)
Sales	$ 1,440,000
Variable costs	1,305,000
Contribution margin	135,000
Fixed costs	350,000
Income (loss)	$ (215,000)

If the Small Tools Division is dropped, all of its variable costs are avoidable, and $105,000 of its fixed costs are avoidable. The impact on Carnss income from eliminating the Small Tools Division would be:

Multiple Choice

• $63,500 decrease

• $30,000 decrease

• $350,000 decrease

• $30,000 increase

• $105,000 decrease

8.)

Soar Incorporated is considering eliminating its mountain bike division, which reported a loss for the recent year of $6,000 as shown below.

Segment Income (Loss)
Sales	$ 1,125,000
Variable costs	890,000
Contribution margin	235,000
Fixed costs	241,000
Income (loss)	$ (6,000)

If the mountain bike division is dropped, all $890,000 of its variable costs are avoidable, and $72,300 of its fixed costs are avoidable. The impact on operating income for eliminating this business segment would be:

Multiple Choice

• $72,300 decrease

• $162,700 decrease

• $66,300 decrease

• $235,000 increase

• Galla Incorporated is a competitive product market. The expected selling price is $390 per unit, and Gallas target profit is 20% of the selling price. Using the target cost method, the highest that Gallas cost per unit can be is:

  Multiple Choice

• $248.

• $232.

• $304.

• $78.

• $312.

• $235,000 decrease

9.)