The degree of operating leverage

Question $13$ options:

A$)$

measures how much of each sales dollar is available to cover fixed expenses.

B$)$

is computed by dividing total contribution margin by net income.

C$)$

cannot be used to compare companies.

D$)$

does not provide a reliable measure of a company's net income volatility.

Direct Materials$$120,000$

Direct Labor$25,000$

Variable Overhead$45,000$

Fixed Overhead$30,000$

If Tex can purchase the component externally for $$190,000$ and only $$5,000$ of the fixed costs can be avoided, what is the correct make$-$or$-$buy decision and why?

Question $12$ options:

A$)$

Buy and save $$15,000$

B$)$

Make and save $$15,000$

C$)$

Make and save $$5,000$

D$)$

Buy and save $$5,000$

Direct Labor$25,000$

Variable Overhead$45,000$

Fixed Overhead$30,000$

If Tex can purchase the component externally for $$190,000$ and only $$5,000$ of the fixed costs can be avoided, what is the correct make$-$or$-$buy decision and why?

Question $12$ options:

A$)$

Buy and save $$15,000$

B$)$

Make and save $$15,000$

C$)$

Make and save $$5,000$

D$)$

Buy and save $$5,000$

WoodAluminumHard RubberTotal

Sales$$500,000$$$200,000$$$65,000$$$765,000$

Variable expenses$325,000140,00058,000523,000$

Contribution margin$175,00060,0007,000242,000$

Fixed expenses$75,00035,00022,000132,000$

Net income $($loss$)$$$100,000$$ $25,000$$$(15,000)$$$110,000$

Assume none of the fixed expenses for the hard rubber line are avoidable. What will be total net income if the line is dropped?

Question $11$ options:

A$)$

$$125,000$

B$)$

$$140,000$

C$)$

$$105,000$

D$)$

$$103,000$

A$)$

cost of replacing the old equipment.

B$)$

book value of the old equipment.

C$)$

difference between future cost savings and the new equipment's costs.

D$)$

salvage value of the old equipment.