Per unit S25 1:5 $70 Direct materials Direct labor g overhead g overhead20 at a

Question

Per unit S25 1:5 $70 Direct materials Direct labor g overhead g overhead20 at a $65 per unit price. If An outside supplier has offered to provide Baxter Corp with the 10,000 Baxter Corp accepts the outside offer, what will be the effect on short-term profits? D$200,000 increase D$150,000 decrease D No change $50,000 increase QUESTION 15 Milli Company plans to di overhead associated with this division is $50,000, of which $5,000 tannot be eliminated. The effect of this on Mill's operating income would be an increase of O $5,000 D $20.000 D $25,000 $30.000 o saue a

Explanation / Answer

14) Manufacturing cost per unit = 25+10+15 = 50

Purchase cost per unit = 65 per unit

Effect on short term profit = (50-65)*10000 = -150000

So answer is b) $150000 Decrease

15) Net profit (loss) if continue division = 20000-50000 = -30000

Net profit (loss) if discontinue divison = -5000

Operating income increase by $25000

So answer is c) $25000

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