Question

1. The condensed income statement for a Fletcher Inc. for the past year is as follows: Product F G H Total Sales $300,000 $210,000 $340,000 $850,000 Costs: Variable costs $180,000 $180,000 $220,000 $590,000 Fixed costs 50,000 50,000 40,000 140,000 Total costs $230,000 $230,000 $260,000 $730,000 Income (loss) $ 70,000 $(20,000) $ 80,000 $120,000 Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Products F and H. What is the amount of change in net income for the current year that will result from the discontinuance of Product G? a. $20,000 increase b. $30,000 increase c. $20,000 decrease d. $30,000 decrease 2. Piper Corp. is operating at 70% of capacity and is currently purchasing a part used in its manufacturing operations for $24 per unit. The unit cost for the business to make the part is $36, including fixed costs, and $26, not including fixed costs. If 15,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it? a. $30,000 cost decrease b. $180,000 cost increase c. $30,000 cost increase d. $180,000 cost decrease Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20 per pound

Answer 1

Answer:

$30,000 decrease

Change in net income = Fixed cost avoidable - contribution margin lost

Explanation: