1. Lusk Corporation produces and sells 14,100 units of Product X each month. The
ID: 2472597 • Letter: 1
Question
1. Lusk Corporation produces and sells 14,100 units of Product X each month. The selling price of Product X is $23 per unit, and variable expenses are $17 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $74,000 of the $104,000 in fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the company’s overall net operating income would:
decrease by $54,600 per month
increase by $19,400 per month
increase by $49,400 per month
decrease by $49,400 per month
2. Barrus Corporation makes 36,000 motors to be used in the productions of its power lawn mowers. The average cost per motor at this level of activity is as follows:
This motor has recently become available from an outside supplier for $23.95 per motor. If Barrus decides not to make the motors, none of the fixed manufacturing overhead would be avoidable and there would be no other use for the facilities. If Barrus decides to continue making the motor, how much higher or lower will the company's net operating income be than if the motors are purchased from the outside supplier? Assume that direct labor is a variable cost in this company.
$68,400 lower
$214,200 higher
$90,000 higher
$158,400 higher
3. Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 12,000 cases of sauce each year but is currently only manufacturing and selling 10,800. The following costs relate to annual operations at 10,800 cases:
Gwinnett normally sells its sauce for $35 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,200 cases of sauce but only if they can get the sauce for $14 per case. This special order would not affect regular sales or total fixed costs or variable costs per unit. If this special order is accepted, Gwinnett's profits for the year will:
increase by $600
decrease by $1,200
decrease by $10,800
decrease by $7,200
4. Nesmith Corporation is considering two alternatives: A and B. Costs associated with the alternatives are listed below:
What is the differential cost of Alternative B over Alternative A, including all of the relevant costs?
$41,000
$162,100
$121,100
$148,200
5. Tawstir Corporation has 500 obsolete personal computers that are carried in inventory at a total cost of $720,000. If these computers are upgraded at a total cost of $160,000, they can be sold for a total of $220,000. As an alternative, the computers can be sold in their present condition for $50,000.
What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?
$10,000 advantage
$60,000 advantage
$720,000 disadvantage
$170,000 advantage
2. Barrus Corporation makes 36,000 motors to be used in the productions of its power lawn mowers. The average cost per motor at this level of activity is as follows:
Explanation / Answer
As per Chegg guidelines we answer one question per post but I have answered more than 1 Question Q1 Statement showing computations Particulars Amount Sales revenue from product X = 14,100*23 324,300.00 Variable Expense =14,100*17 239,700.00 Avoidable fixed costs = 104,000-74,000 30,000.00 Income from Product X = 324,300 - 239,700 - 30,000 54,600.00 If Product X is discontinued, the company’s overall net operating income would decrease by $54,600 per month Q4 $41,000 Statement showing computations Particulars Alternative A Alternative B Differential Materials Costs 42,000.00 55,000.00 (13,000.00) Equipment rental 11,400.00 28,700.00 (17,300.00) Occupancy Costs 19,700.00 30,400.00 (10,700.00) Total costs 73,100.00 114,100.00 (41,000.00)
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