Suggested time: $5$ minutes

$10$ points

Dolls R Us sells three products in retail stores.

Results of the fourth quarter are:

Baby Teen Plush

Dolls Dolls Dolls Total

Units sold $1,0002,0002,000$

Revenue $32,00043,00026,000101,000$

Variable departmental costs $22,00024,00013,00059,000$

Direct fixed costs $5,0004,0003,00012,000$

Allocated fixed costs $6,0007,0007,00020,000$

Net income $($loss$)(1,000)8,0003,00010,000$

INSTRUCTIONS

Demand for individual products is not affected by changes in other product lines.

Prepare an incremental analysis to determine if the Baby Dolls should be

discontinued.

State your recommendation to management.

Suggested time: $5$ minutes

$10$ points

Home Appliances Co$.$ wants to introduce a new digital display, laser driven iron

to the market. The estimated unit sales price is $$85.$ The required investment

is $$3,500,000.$ Unit sales are expected to be $300,000$ and the minimum required

rate of return on all investments is $15\%.$

INSTRUCTIONS

Compute the target cost per iron.