____9. It costs a company $14 of variable costs and $6 of fixed costs to produce

Question

____9. It costs a company $14 of variable costs and $6 of fixed costs to produce product Z200 that sells for $30. A foreign buyer offers to purchase 3,000 units at $18 each. The seller will incur special shipping costs of $5 per unit. If the special offer is accepted and produced with unused capacity, and none of the fixed costs are affected, then net income will:

a. increase $3,000.

b. increase $12,000.

c. decrease $12,000.

d. decrease $3,000.

___10. Jobart Company is currently operating at full capacity. It is considering buying a part from an outside supplier rather than making it in-house. If Jobart purchases the part, it can use the released productive capacity to generate additional income of $30,000 from producing a different product. When conducting incremental analysis in this make-or-buy decision, the company should:

a. ignore the $30,000.

b. add $30,000 to other costs in the

Explanation / Answer

9. Change in net income = 3000*(18-14-5) = -3000 .d. decrease $3,000.

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