The SP Corporation makes 35,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is:

Direct materials	$	9.40
Direct labor	$	8.40
Variable manufacturing overhead	$	3.40
Fixed manufacturing overhead	$	4.35

An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $23.65. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:

Multiple Choice

• ($66,500)

• $204,750

• 85,750

• $152,250

Lusk Corporation produces and sells 14,600 units of Product X each month. The selling price of Product X is $28 per unit, and variable expenses are $22 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $74,000 of the $101,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be:

Multiple Choice

• ($60,600)

• $13,400

• $40,400

• ($40,400)

If net operating income is $87,000, average operating assets are $522,000, and the minimum required rate of return is 13%, what is the residual income?

Multiple Choice

• $106,140

• $48,720

• $19,140

• $67,860

BR Company has a contribution margin of 20%. Sales are $622,000, net operating income is $124,400, and average operating assets are $141,000. What is the company's return on investment (ROI)?

Multiple Choice

• 4.4%

• 20.0%

• 88.2%

• 0.2%