Henderson Manufacturing Inc. Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 6000 motors are manufactured each year, the motor costs per unit are as follows: $\begin{array}{lr} \text { Direct materials } &\$3\\ \text {Direct labour } &4\\ \text { Variable overhead } &5\\ \text { Fixed overhead } &8\\ \end{array}$ Plymouth Inc. has offered to sell Henderson 6000 motors for $15 per unit. If Henderson accepts the offer, 60% of the fixed overhead currently allocated to the motors could be avoided. -What are the relevant costs per unit of Henderson manufacturing the motors themselves?

A) $16.80 B) $15.20 C) $20.00 D) $12.00 A) $16.80 B) $15.20 C) $20.00 D) $12.00 A

Serenity Garden Inc. Serenity Garden Inc. produces and sells a variety of garden accessories. One of the product lines the company makes is unpainted gnome statues that come in three sizes: small, medium, and large. The company is considering painting the gnomes. The following information is available regarding unpainted and painted gnomes: $\begin{array}{lrrr} &\text { Small}&\text { Medium } & \text { Large }\\ \text { Initial sales price } & \$ 40 & \$ 60 & \$ 80 \\ \text { Initial cost } & 15 & 20 & 23 \\ \text { Sales price after painting } & 47 & 70 & 95 \\ \text { Cost of painting } & 8 & 9 & 11 \\ & & & \\ \text { Number sold per year } & 500 & 1000 & 400 \end{array}$ -What is the maximum amount that net income could increase each year with further processing?

A) $2100 B) $2600 C) $7600 D) $1600 A) $2100 B) $2600 C) $7600 D) $1600 B

Compton Products Inc. Compton Products Inc. manufactures humidifiers. The company currently makes all of the electronic components for the humidifier itself. When 10 000 units are manufactured each year, the motor costs per unit are as follows: $\begin{array}{lr} \text { Direct materials } & \$ 6 \\ \text { Direct labour } & 8 \\ \text { Variable overhead } & 7 \\ \text { Fixed overhead } & 9 \end{array}$ McClintock Inc. has offered to sell Compton 10 000 motors for $25 per unit. If Compton accepts the offer, 75% of the fixed overhead currently allocated to the motors could be avoided. -What are the relevant costs per unit of Compton making the motors themselves?

A) $21.00 B) $23.25 C) $27.75 D) $30.00 A) $21.00 B) $23.25 C) $27.75 D) $30.00

Preston Wade Preston Wade, a local craftsman, normally sells his handcrafted wooden birdhouses for $88 each. Preston has the capacity to produce as many as 50 birdhouses a week. In a normal week, Preston makes 20 birdhouses with the following costs per unit: $\begin{array}{lc} \text { Direct materials } & \$ 5.00 \\ \text { Direct labour } & \$ 20.00 \\ \text { Variable overhead } & \$ 4.00 \\ \text { Fixed overhead } & \$ 2.00 \end{array}$ -Refer to the Preston Wade information below. Preston has received a special order from a local plant nursery to purchase 25 birdhouses for a price of $90 each.The nursery wishes to have the birdhouses engraved with their own logo,therefore,the order would require the rental of a special engraving tool at a cost of $200.If Preston accepts the special order,net income will increase by:

A) $1525 B) $1325 C) $1275 D) $1475 A) $1525 B) $1325 C) $1275 D) $1475

Joyner Products Joyner Products makes cedar garden benches in three sizes: small, medium, and large. Joyner sells the benches to local retailers. The benches can be sold with or without assembly. The following information is available for each table: $\begin{array}{lrrr}.&\text { Small }& \text { Medium } & \text { Large }\\ \text { Initial sales price } & \$ 90 & \$ 150 & \$ 250 \\ \text { Initial cost } & 30 & 45 & 70 \\ \text { Sales price after assembly } & 110 & 180 & 260 \\ \text { Cost of assembly } & 15 & 20 & 25 \\ & & & \\ \text { Number sold per month } & 120 & 350 & 150 \end{array}$ -Which bench(es)should be assembled before they are sold to retailers?

A) Small and medium B) Medium and large C) Small and large D) Small,medium,and large A) Small and medium B) Medium and large C) Small and large D) Small,medium,and large

Henderson Manufacturing Inc. Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 6000 motors are manufactured each year, the motor costs per unit are as follows: $\begin{array}{lr} \text { Direct materials } &\$3\\ \text {Direct labour } &4\\ \text { Variable overhead } &5\\ \text { Fixed overhead } &8\\ \end{array}$ Plymouth Inc. has offered to sell Henderson 6000 motors for $15 per unit. If Henderson accepts the offer, 60% of the fixed overhead currently allocated to the motors could be avoided. -If Henderson accepts the offer to purchase 6000 motors from Plymouth,net income will:

A) decrease by $1200. B) increase by $30 000. C) decrease by $18 000. D) increase by $10 800. A) decrease by $1200. B) increase by $30 000. C) decrease by $18 000. D) increase by $10 800.