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*Amazon has been concerned for some time with the financial performance of its product I11S and has considered discontinuing it on several occasions. Data from

*Amazon has been concerned for some time with the financial performance of its product I11S and has considered discontinuing it on several occasions. Data from the company's accounting system appear below:

Sales

$760,000

Variable Expenses

$350,000

Fixed Manufacturing Expenses

$258,000

Fixed Selling and Administrative Expenses

$198,000

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $110,000 of the fixed manufacturing expenses and $90,000 of the fixed selling and administrative expenses are avoidable if product I11S is discontinued. What would be the effect on the company's overall net operating income if product I11S were dropped?

a.

$210,000.00

b.

$20,000.00

c.

$300,000.00

d.

$320,000.00

*Amazon., processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs $60 to buy from farmers and $13 to crush in the company's plant. Two intermediate products, cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold as is for $29 or processed further for $13 to make the end product industrial fiber that is sold for $61. The cane juice can be sold as is for $40 or processed further for $28 to make the end product molasses that is sold for $67. What is the financial advantage (disadvantage) for the company from processing one batch of sugar cane into the end products industrial fiber and molasses?

Select one:

a.

($114) per batch

b.

$18 per batch

c.

$14 per batch

d.

($4) per batch

*Amazon uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 200 units and of Product B is 400 units. There are three activity cost pools, with total cost and activity as follows: Total Activity

Activity Cost Pools

Total Cost

Product A

Product B

Total

Activity 1

$16,660

600

100

700

Activity 2

$18,450

1,100

700

1,800

Activity 3

$9,731

60

160

220

The activity rate for Activity 2 is closest to:

Select one:

a.

$24.91

b.

$26.36

c.

$10.25

d.

$16.77

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