1. The following information pertains to Brian Stone Corporation:

Beginning fixed manufacturing overhead in inventory	$45,750
Ending fixed manufacturing overhead in inventory	52,500
Beginning variable manufacturing overhead in inventory	$30,000
Ending variable manufacturing overhead in inventory	14,250
Fixed selling and administrative costs	$724,000
Units produced	5,000 units
Units sold	4,800 units

What is the difference between operating incomes under absorption costing and variable costing?

1. $750
2. $7,500
3. $14,000
4. $15,750
5. $30,750

Answer the following question(s) using the information below.

Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:

Direct materials	$45,000
Direct labour	105,000
Variable factory overhead	30,000
Fixed factory overhead	70,000
Total costs	$250,000

Of the fixed factory overhead costs, $30,000 is avoidable.

2. Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $18 per unit. Assuming there is no other use for the facilities, Schmidt should
   1. make the part, as this would save $3 per unit.
   2. buy the part, as this would save $3 per unit.
   3. make the part, as this would save $4 per unit.
   4. make the part, as this would save $2 per unit.
   5. buy the part, as this would save $4 per unit.

3. Assuming no other use of their facilities, the highest price that Schmidt should be willing to pay for 10,000 units of the part is
   1. $210,000.
   2. $160,000.
   3. $150,000.
   4. $220,000.
   5. $140,000.

Use the information below to answer the following question(s):

Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows:

Direct materials	$2.00
Direct labour	$4.00
Variable manufacturing overhead	2.00
Fixed manufacturing overhead	$1.00
Total cost	$9.00
The fixed overhead costs are unavoidable.

4. Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do?
   1. Make the part and save $1 per unit.
   2. Make the part and save $3 per unit.
   3. Buy from Erickson and save $1 per unit.
   4. Make the part and save $5 per unit.

5. Assuming no other use for its facilities, what is the highest price per unit that Spahr Company should be willing to pay for the part?
   1. $10
   2. $8
   3. $12
   4. $6

Use the information below to answer the following question(s):

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows:

Direct materials	$4.00
Direct labour	$4.00
Variable manufacturing overhead	$3.00
Fixed manufacturing overhead	$1.00
Total cost	$12.00
The fixed overhead costs are unavoidable.

6. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $9 each, and the facilities currently used to make the part could be rented out to another manufacturer for $24,000 a year, what should Cruise Company do?
   1. Make the part and save $6.00 per unit.
   2. Make the part and save $2.00 per unit.
   3. Buy the part and save $2.00 per unit.
   4. Buy the part and save $6.00 per unit.