QUESTION 5 The MSU produces 1,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is: Variable manufacturing cost....... S12 Fixed manufacturing cost..... Unit product cost........ The part can be purchased from an outside supplier at $20 per unit. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. The annual impact on the company's net operating income as a result of buying the part from the outside supplier would be: a. b. $1,000 increase. $1,000 decrease $5,000 increase. $2,000 decrease. QUESTION 6 A study has been conducted to determine if one of the departments in MSU Company should be discontinued. The contribution margin in the department is $50,000 per year. Fixed expenses charged to the department are $65,000 per year. It is estimated that $40,000 of these fixed expenses could be eliminated if the department is discontinued. These data indicate that if the department is discontinued, MSU's overall net operating income would: decrease by $25,000 per year. increase by $25,000 per year. decrease by $10,000 per year. increase by $10,000 per year. QUESTION 7 MSU Corporation's budgeted sales are $600,000, its budgeted variable expenses are $420,000, and its budgeted fixed expenses are $120,000. The company's break-even in dollar sales is: a. b. c. d. $ 60,000 $ 180,000 $ 400,000 $ 480,000 Question 8 is on the next page QUESTION 8 MSU manufactures seats for trains. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production: Sale price per unit $400 Variable costs per unit: Manufacturing Marketing and administrative S220 SSO Total fixed costs: Manufacturing $750,000 Marketing and administrative S200,000 If a special sales order is accepted for 3,000 seats at a price of $300 per unit, and fixed costs increase by $10,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) A) Decrease by $80,000 B) Increase by $230,000 C) Increase by $90,000 D) Increase by $80,000