Division A, which is operating at capacity, produces a component, all of which sells in a perfectly competitive market for $25 per unit. At the current level of production, the fixed cost of producing this component is $8 per unit and the variable cost is $10 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is:

A) $10 per unit.

B) $18 per unit.

C) $20 per unit.

D) $25 per unit.

E) $8 per unit

.A study has been conducted to determine if Product A should be dropped. Sales of the product total $200,000 per year; variable expenses total $140,000 per year. Fixed expenses charged to the product total $90,000 per year. The company estimates that $40,000 of these fixed expenses will continue even if the product is dropped. These data indicate that if Product A is dropped, the company's overall net operating income would:

A) decrease by $20,000 per year.

B) increase by $20,000 per year.

C) decrease by $10,000 per year.

D) increase by $30,000 per year.

Manor Company plans to discontinue a department that has a contribution margin of $25,000 and $50,000 in fixed costs. Of the fixed costs, $29,000 cannot be eliminated. The effect on the profit of Manor Company of discontinuing this department would be:

A) a decrease of $4,000.

B) an increase of $4,000.

C) a decrease of $25,000.

D) an increase of $25,000.

Products A, B, and C are produced from a single raw material input. The raw material costs $90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product A should be:

A) sold at the split-off point, since further processing would result in a loss of $0.50 per unit.

B) processed further, since this will increase profits by $2,500 each period.

C) sold at the split-off point, since further processing will result in a loss of $2,500 each period.

D) processed further, since this will increase profits by $12,500 each period.