question 1

Miracle Grow Company spent $532,000 to produce 100,000 gallons of a fertilizer that can be sold for $4.80 per gallon. This fertilizer can be further processed into a weed killer that can be sold for $8.00 per gallon. It will cost $200,000 to process the fertilizer into the weed killer. Which of the following is true?

Group of answer choices

If the company decides to process further, it will increase operating income by $320,000

To maximize operating income, the company should continue to sell the chemical as is

If the company decides to process further, it will increase operating income by $120,000

If the company decides to process further, it will increase operating income by $240,000

If the company decides to process further, it will increase operating income by $510,000

question 2

Vucin Corporation has provided you with the following budgeted income statement for one of its products:

Sales revenue	$800,000
(Variable costs)	(540,000)
Contribution margin	$260,000
(Fixed costs)	(275,000)
Operating income (loss)	($15,000)

Victor Corporation believes that 70% of the fixed costs would be avoidable if the product line was dropped.

If Vucin keeps this product line, it will save $_________ over dropping the product line.