The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000 Homs p year. Per unit costs to produce and sell one Hom at that activity level are: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling expense $20 $10 $5 $7 $10 $8 C The regular selling price for one Hom is $60. A special order has been received at Varone from the Fairview Company to purchase 6,300 Homs next year at 20% off the regular selling price. If this special order were accepted, the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specialized machine to engrave the Fairview name on each Hom in the special order. This machine would cost $10,800 and it would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost. If Varone can expect to sell 30,000 Homs next year through regular channels and the special order is accepted at 20% off the regular selling price, the effect on net operating income next year due to accepting this order would be a:

Reuben's Deli currently makes rolls for deli sandwiches it produces. It uses 31,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are: Materials $0.24 per roll Labor 0.39 per roll Variable overhead 0.16 per roll Fixed overhead 0.20 per roll A potential supplier has offered to sell Reuben the rolls for $0.89 each. If the rolls are purchased, 30% of the fixed overhead could be avoided. If Reuben accepts the offer, what will the effect on profit be? decline in profit if he buys the rolls. Reuben would see a $

Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 8,700 units per year for $10.00 each. Mohave the following information about the cost of producing tote bags: Direct materials $ 6.00 Direct labor 2.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 1.50 Total cost per unit $ 10.50 Mohave determined all variable costs could be eliminated by outsourcing the tote bags, while 70 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags. Required: 1) Based on the incremental analysis, should Mohave buy the tote bags or continue making them? 2) Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $12,000 in annual profits. Recompute the difference in cost…

The machining division of Cullumber International has a capacity of 2,000 units. Its sales and cost data are: Selling price per unit $80 Variable manufacturing costs per unit 25 Variable selling costs per unit 3 Total fixed manufacturing overhead 183,200 The machining division is currently selling 1,800 units to outside customers, and the assembly division of Cullumber International wants to purchase 400 units from machining. If the transaction takes place, the variable selling costs per unit on the units transferred to assembly will be $0/unit, and not $3/unit. If Cullumber's assembly division is currently buying from an outside supplier at $75 per unit, what will be the effect on overall company profits if internal sales for 400 units take place at the optimum transfer price? The company profits would by $