Cocoa Beach Company is considering replacing a machine that is presently used in the production of its product.The following data are available: \[\begin{array} { l r r } & \text { Old Machine } & \begin{array} { r } \text { Replacement } \\ \text { Machine } \end{array} \\ \text { Original cost } & \$ 200,000 & \$ 160,000 \\ \text { Useful life in years } & 10 & 5 \\ \text { Current age in years } & 5 & 0 \\ \text { Book value } & \$ 100,000 & - \\ \text { Disposal value now } & \$ 32,000 & - \\ \text { Disposal value in 5 years } & 0 & 0 \\ \text { Annual cash operating costs } & \$ 20,000 & \$ 14,000 \end{array}\] Ignoring income taxes, the difference in cost between the old and new machine is _____.

A) $98,000 in favor of the old machine B) $98,000 in favor of the new machine C) $40,000 in favor of the new machine D) $12,000 in favor of the new machine A) $98,000 in favor of the old machine B) $98,000 in favor of the new machine C) $40,000 in favor of the new machine D) $12,000 in favor of the new machine

Riverside Industries has three product lines, A, B, and C.The following information is available: $\begin{array}{l}&A&B&C\\ \text { Sales } & \$ 100,000 & \$ 90,000 & \$ 44,000 \\ \text { Variable costs } & \underline{76,000} & \underline{48,000} & \underline{35,000} \\ \text { Contribution margin } & \$ 24,000 & \$ 42,000 & \$ 9,000\\ \text { Fixed costs: }\\ \text { Avoidable } & 9,000 & 18,000 & 3,000 \\ \text { Unavoidable } & \underline{6,000} & 9,000 & \underline{7,700} \\ \text { Operating income } & \$ 9,000 & \$ 15,000 & \$ 1,700) \end{array}$ Riverside Industries is thinking of dropping product line C because it is reporting a loss.Assuming Riverside drops line C and does not replace it, the operating income will _____.

A) increase by $2,400 B) increase by $600 C) decrease by $6,000 D) decrease by $9,000 A) increase by $2,400 B) increase by $600 C) decrease by $6,000 D) decrease by $9,000

Tucson Corporation has a joint process that produces three products: X, Y, and Z.Each product may be sold at split-off or processed further and then sold.Joint- processing costs for a year amount to $100,000.Other relevant data are as follows: $\begin{array}{rlc} && \text { Separable } & \\ && \text { Processing } & \\ &\text { Sales Value } & \text { Costs after } & \text { Sales Value } \\ \text { Product } & \text {at Split-off } & \text { Split-off } & \text { at Completion }\\ \mathrm{X} & \$ 128,000 & \$ 16,000 & \$ 160,000 \\ \mathrm{Y} & 75,000 & 26,000 & 99,000 \\ \mathrm{Z} & 32,600 & 20,000 & 50,000 \end{array}$ Once product X is produced, processing it further will cause profits to _____.

A) increase by $32,000 B) decrease by $16,000 C) decrease by $32,000 D) increase by $16,000 A) increase by $32,000 B) decrease by $16,000 C) decrease by $32,000 D) increase by $16,000

Johnson Company manufactures a part for its production cycle.The costs per unit for 10,000 units of this part are as follows: $\begin{array}{lr} \text { Direct materials } & \$ 20 \\ \text { Directlabor } & 15 \\ \text { Variable factory overhead } & 16 \\ \text { Fixed factory overhead } & 10 \\ \text { Total costs } & \$ 61 \end{array}$ The fixed factory overhead costs are unavoidable.Assume that Johnson Company can buy 10,000 units of the part from another producer for $60 each.The facilities currently used to make the part could be rented out to another manufacturer for $100,000 a year.Johnson Company should _____.

A) buy the part to save $2.50 per unit B) buy the part to save $1 per unit C) make the part to save $2.50 per unit D) make the part to save $1 per unit A) buy the part to save $2.50 per unit B) buy the part to save $1 per unit C) make the part to save $2.50 per unit D) make the part to save $1 per unit