Question
Struggling on these 3, thanks for the help!! Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.10 per unit. Bluebird
Struggling on these 3, thanks for the help!! Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.10 per unit. Bluebird currently produces and sells 75,000 units at $7.10 each. This level represents 80% of its capacity. Production costs for these units are $3.65 per unit, which includes $2.30 variable cost and $1.35 fixed cost. If Bluebird accepts this additional business, the effect on net income will be: |
$12,000 increase.
$8,250 decrease.
$34,500 decrease.
$46,500 increase.
$34,500 increase.
Chang Industries has 1,900 defective units of product that have already cost $13.90 each to produce. A salvage company will purchase the defective units as they are for $4.90 each. Chang's production manager reports that the defects can be corrected for $6.10 per unit, enabling them to be sold at their regular market price of $20.80. The incremental income or loss on reworking the units is: |
$30,210 income.
$11,590 loss.
$18,620 income.
$27,930 income.
$18,620 loss.
Granfield Company has a piece of manufacturing equipment with a book value of $36,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $21,300. Granfield can purchase a new machine for $113,000 and receive $21,300 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $18,300 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is: |
$49,550 increase
$18,500 increase
$18,500 decrease
$15,200 decrease
$73,200 decrease
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