THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 12 TO 14: Horizon Auto Maker Company manufactures its own car mufflers. It reports the following cost information about the costs of making car mufflers in 2011 and the expected costs in 2012: Current costs Expected 2011 costs 2012 Variable manufacturing costs Direct material cost per unit $180 $170 Direct manufacturing cost per unit $50 $45 Variable manufacturing cost per batch for setups, MH, and quality control $1,600 $1.500 Fixed manufacturing costs Fixed manufacturing OH that can be avoided if mufflers are not made $320,000 $320.000 Fixed manufacturing OH that cannot be avoided even if mufflers are not made (plant depreciation, insurance,) $500,000 $500,000 Horizon manufactured 8,000 mufflers in 2011 in 40 batches. In 2012, Horizon anticipates needing 10,000 mufflers. These mufflers would be produced in 80 batches. Richfield Company has approached Horizon about supplying car mufflers to Horizon in 2012 at $300 per unit on whatever delivery schedule Horizon want. 12. Suppose the capacity currently used to make car mufflers will become idle if Horizon purchases car mufflers from Richfield Company. On the basis of financial considerations alone, Horizon Company should: a. b. C. Make car mufflers because there will be $73 cost reduction in favor of making Make car mufflers because there will be $41 cost reduction in favor of making Buy car mufflers because there will be $39 cost reduction in favor of buying d. Buy car mufflers because there will be $33 cost reduction in favor of buying 13. Now suppose that if a Horizon purchases car muffler from Richfield, its best alternative use of capacity is to make and sell tailpipes to another company. Horizon estimates the incremental revenues from tailpipes to be $2,000,000, and incremental costs from tailpipes to be $2,150,000. On the basis of financial considerations alone, Horizon Company should: a. Make car mufflers alone b. Buy car mufflers alone c. Buy car mufflers and make tailpipes d. Make tailpipes alone || 14. On the last day of period, a manufacturing company buys a $750 machine on credit. This transaction will affect a. Income statement only. b. Balance sheet only. c. Income statement and owner's equity statement only EAM d. Income statement, owner's equity statement, and balance sheet. THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 15 TO 19: Specialized Engineers Company manufactures and sells a special-purpose machine, M4T, which used in textile industry. In 2011, it reported the following Units produced and sold Investment Full cost per unt Rate of return on investment Markup percentage on variable cost 2011 17,500 $1,400,000 $300 20% 50% 15. What was the selling price in 2011? a. $360 b. 5316 P $450 d $336 16. What was the percentage markup on full cost? a. 50% b. 20% C. 12% d 5.3% 17. What was the variable cost per unit? a. $211 b. $250 4345