Question 51. Part U16 is used by Mcvean Corporation to make one of its prod

51. Part U16 is used by Mcvean Corporation to make one of its products. A total of 13,000 units of this part are produced and used every year. The company’s Accounting Department reports the following costs of producing the part at this level of activity:

An outside supplier has offered to make the part and sell it to the company for $29.80 each. If this offer is accepted, the supervisor’s salary and all of the variable costs, including the direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company, none of which would be avoided if the part were purchased instead of produced internally. In addition, the space used to make part U16 could be used to make more of one of the company’s other products, generating an additional segment margin of $25,000 per year for that product. What would be the impact on the company’s overall net operating income of buying part U16 from the outside supplier?

A) Net operating income would increase by $25,000 per year.

B) Net operating income would decline by $79,000 per year.

C) Net operating income would decline by $35,400 per year.

D) Net operating income would increase by $14,600 per year.

52. Landor Appliance Company makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period.

A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

A) $28

B) $27

C) $31

D) $24

53. Ignace Timekeepers, Inc. manufactures and sells wrist watches. Ignace has the capacity to manufacture and sell 20,000 watches each year but is currently only manufacturing and selling 15,000. The following costs relate to annual operations at 15,000 watches:

Ignace normally sells its watches for $42 each. A discount chain is interesting in purchasing Ignace’s excess capacity of 5,000 watches. This special order would not affect regular sales or the cost structure above. Ignace’s profits for the year will increase as long as the price on this special order exceeds:

A) $12.00

B) $13.50

C) $16.00

D) $31.00

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.