Chapter 14 Problems 1. Quinta Inc, manufactures machine parts for aircraft engines. The CEO is considering an offer from a subcontractor who would provide 2,800 units of product QR128 for a price of $190,000. If Quinta does not purchase these parts from the subcontractor it must produce them in-house with the following costs: $22 18 14 Direct Materials Direct Labor Variable Overhead Allocated Fixed Factory Overhead Allocated Fixed Selling Costs Total Cost 16 5 $75 If Quinta produces part QR128, there would also be incremental fixed costs of $13,000 per period. Should Quinta Inc. accept the offer from the subcontractor? 2. Boise, a division of Price Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceable variable and fixed operating costs total $80,000 and $25,000, respectively, in addition to $18,000 of corporate administrative overhead allocated from Price. If Boise were to use the outside consultant, fixed operating costs would be reduced by 70%. What are the irrelevant costs associated with making this decision and why? 3. Brilliant, Inc. reported the following results from the sale of 24,000 units of IT-54: Sales Variable manufacturing costs $528,000 288,000 120,000 Fixed manufacturing costs Variable selling costs 52,800 35,200 Fixed administrative costs Extra Company has offered to purchase 3,000 IT-54s at $16 each. Brilliant has available capacity, and the president is in favor of accepting the order. She feels it would be profitable because no variable selling costs will be incurred. The plant manager is opposed because the "full cost of production is $17. What is the change in income if the special order is accepted