Question

15. Wheeler Company can produce a product that incurs the following costs per unit: direct materials, $9.00; direct labor, $23.00, and overhead, $15.00. An outside supplier has offered to sell the product to Wheeler for $41.45. If Wheeler buys from the supplier, it will still incur 45% of its overhead cost. Compute the net incremental cost or savings of buying. $2.89 savings per unit. $2.89 cost per unit. $1.20 cost per unit. $2.70 cost per unit. $1.20 savings per unit.

Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $41,600. The division sales for the year were $952,400 and the variable costs were $471,000. The fixed costs of the division were $523,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be: $272,200 increase $481,400 decrease $209,200 increase $272,200 decrease $481,400 increase

Answer 1