THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 10 AND 11: LMK Reach manufactures baby toys as its main product. The costs per unit are as follows Direct materials Direct labor Variable overhead Fixed overhead $1.00 (1+10+5)x 5'+15,000 :95,0w 10.00 5.00 8.00 $24.00 Khaleed International has contacted LMK Reach with an offer to sell 5,000 of the subassemblies for $22.00 each. LMK Reach will not be able to eliminate $15,000 of fixed overhead if it accepts the proposal. 10. What are the relevant costs for LMK? A) $140,000 C) $105,000 $125,000 ,000 11. Should LMK make or buy the subassemblies? What is the difference between the two alternatives? A) Buy; savings- $20,000 B) Make; savings $60,000 12. For February, the cost components of a picture frame include $0.30 for the glass, $0.75 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $500. Two hundred fifty frames are expected to be produced in the coming year. What cost function best represents these costs? A) y 1.85+500X C) y 3.85+600X 13. If an unprofitable segment is eliminated: A) Net income will always increase. B) Variable expenses of the eliminated segment will have to be absorbed by other segments C) Fixed expenses allocated to the eliminated segment will have to be absorbed by other segments. D) Net income will always decrease. If an unprofitable segment is eliminated B) Buy; savings- $50,000 D) Make; savings- $5,000 B) y-500+ 1.85X D) y = 1.05 + 500x 14. The high-low method: A) Easily handles estimating the relationship between the dependent variable and two or more independent variables B) Is more accurate than the regression C) Calculates the slope coefficient using only two observed values within the relevant range D) Uses the residual term to measure goodness of fit 15. Which of the following is relevant to a decision to replace a piece of old machinery? A) Cost of the old equipment B) Depreciation on the old equipment D) Maintenance cost of the old equipment C) Book value of the old equipment