Which of the following costs is NOT relevant to a make-or-buy decision?

a. $10,000 of direct labor used to manufacture the parts. $30,000 of depreciation on the equipment used to manufacture b. the parts. The supervisor's salary of $25,000, which would be avoided if the c. part is purchased from an outside supplier. $15,000 in rent from leasing the production space to another d. company if the part is purchased from an outside supplier.

The following information pertains to the Norfolk Company's three products:

2 .

Product B's production is increased to 700 units per year but B's selling price on all units of B is reduced to $8.00. Assuming everything else remains the same as the original data, annual profits will:
a. decrease by $400. b. increase by $700. c. decrease by $1,800. d. increase by $1,400.

The following information pertains to the Norfolk Company's three products:

3 .

Assume that Product C is discontinued and the extra space is devoted to the production of Product A. Product A production is increased to 500 units per year, but the selling price on all units of A is reduced to $7.00. Assuming everything else remains the same as the original data, annual profits will:

a. increase by $1,900. b. increase by $100. c. increase by $560. d. decrease by $2,000.

The following information pertains to the Norfolk Company's three products:

4 . Assume that Product C is discontinued and the extra space is devoted to the production

of Product A. Product A production is increased to 350 units per year, but the selling price on all units of A is reduced to $6.50. Assuming everything else remains the same as the original data, annual profits will:
a. increase by $1,155. b. decrease by $185. c. decrease by $1,440. d. increase by $100.

The following information pertains to the Norfolk Company's three products:

5 .

Assume that the selling price of Product C is increased to $7.00 with a reduction in annual sales to 150 units. Assuming everything else remains the same as the original data, annual profits will:
a. increase by $175.

b. increase by $25. c. decrease by $100. d. increase by $75.

Smolney Company produces 8,000 parts each year, which are used in the production of one of its products. The parts cost $36 each to produce, computed as follows:

The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle, and fixed production costs would be 6. reduced by 1/4. If the parts are purchased from an outside supplier, the annual impact on the operating income will be a:
a. $24,000 increase. b. $56,000 decrease. c. $24,000 decrease. d. $56,000 increase.

Mains Company produces a product that can be sold for $15. It has the capacity to produce 15,000 units per month. Based on this level of activity, the following unit costs are incurred:

The fixed costs, both manufacturing and administrative, are constant in total within the
7. relevant range of 10,000 to 15,000 units per month. A special order has been received

from a customer who wants to pay a reduced price of $10 per unit. There would be no selling expense in connection with this special order. This order would have no effect on the company's other sales. If the order is for 4,000 units this month, the impact on net income will be a:
a. $5,000 increase. b. $5,000 decrease. c. $6,000 increase.

d. $6,000 decrease.

Mains Company produces a product that can be sold for $15. It has the capacity to produce 15,000 units per month. Based on this level of activity, the following unit costs are incurred:

The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 units per month. A special order has been received 8. from a customer who wants to pay a reduced price of $10 per unit. There would be no selling expense in connection with this special order. This order would have no effect on the company's other sales. If the order is for 6,000 units this month, the impact on net income will be a:
a. $1,500 increase. b. $5,000 increase. c. $7,500 increase. d. $6,000 increase.

Albany Company makes two products, P and Q, in a joint process. At the split-off point, 60,000 units of P and 70,000 units of Q are available each month. Monthly joint production costs equal $200,000. Product P can be sold at the split-off point for $3.20 per unit. Product Q can be sold at the split-off point for $2.60 per unit, or it can be processed further and sold for $5.80 per unit. If Product Q is processed further, additional processing costs will be $2.30. If Product Q is processed further, rather than sold at split-off, the impact on net income 9. would be a:
a. $137,000 decrease. b. $245,000 increase. c. $63,000 increase. d. $244,000 increase.

Albany Company makes two products, P and Q, in a joint process. At the split-off point,
10. 60,000 units of P and 70,000 units of Q are available each month. Monthly joint

production costs equal $200,000. Product P can be sold at the split-off point for $3.20

per unit. Product Q can be sold at the split-off point for $2.60 per unit, or it can be processed further and sold for $5.80 per unit. If Product Q is processed further, additional processing costs will be $2.30. What would the unit selling price of Product Q need to be at the split-off point in order for the Albany Company to be economically indifferent between selling at the split-off point or processing further before the sale?
a. $3.50 b. $3.80 c. $3.20 d. $2.90