7. The Mystic Company needs 15,000 units of a certain part to use in its production cycle. If Mystic buys the part from Heart Company instead of making it, Mystic could not use the released facilities in another manufacturing activity; thus all of the fixed overhead applied will continue regardless of what decision is made. Accounting records provide the following data: Cost to Mystic to make the part: Direct materials Direct labor Variable factory overhead Fixed overhead applied Cost to buy the part from the Heart Company $3 11 13 8 $28 What should Mystic's decision be, and what is the total cost savings that would result? a. Make, $15,000 b. Make, $90,000 c. Buy, $15,000 d. Buy, $90,000 Use the following information to answer Questions 8 and 9: ABC Company's management wants to determine if Division B should be eliminated. The following data are available (in thousands). Contribution Margin Income Statement Division A Division B Division C Total Sales $400 $400 $600 $1,400 Less variable costs 280 250 360 890 Contribution margin $120 $150 $240 $510 Less traceable fixed costs 70 170 120 360 Division income $50 ($20) $120 $150 Less unallocated fixed costs 90 Income before taxes $60 8. Assuming all traceable fixed costs of Division B are avoidable, what would be the change in income before taxes if Division B were eliminated? a. $20,000 decrease b. $20,000 increase c. $170,000 decrease d. $150,000 increase 9. Assuming one-half of the traceable fixed costs of Division B are avoidable, what would be the change in income before taxes if Division B were eliminated? a. $85,000 increase b. $85,000 decrease c. $65,000 increase d. $65,000 decrease