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36. Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $3,000. The division sales for the year were $1,057,000 and the variable costs were $860,000. The fixed costs of the division were $200,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:

Multiple Choice

$197,000 increase

$57,000 decrease

$137,000 decrease

$197,000 decrease

$60,000 decrease

37. Aloan Co. provides the following sales forecast for the next three months:

	January		February		March
Sales units	2,000		3,100		4,000

The company wants to end each month with ending finished goods inventory equal to 20% of the next months sales. Finished goods inventory on December 31 is 400 units. The budgeted production units for February are:

Multiple Choice

3,100 units.

3,280 units.

3,900 units.

4,000 units.

2,920 units.

38. Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor rate variance.

Direct labor standard (2 hrs. @ $12.75/hr.)	$	25.50		per finished unit
Actual direct labor hours		68,800		hrs.
Actual finished units produced		34,000		units
Actual cost of direct labor	$	946,950

Multiple Choice

$79,950 favorable.

$69,750 unfavorable.

$10,200 unfavorable.

$79,950 unfavorable.

$69,750 favorable.

39. Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $2.50 per unit. Bluebird currently produces and sells 75,000 units at $6.50 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesalers name and would not affect Bluebirds sales through its normal channels. Production costs for these units are $3.65 per unit, which includes $2.00 variable cost and $1.65 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

Multiple Choice

$37,500 increase.

$7,500 increase.

$30,000 decrease.

$17,250 decrease.

$30,000 increase.

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