Reference no: EM133081455

Questions -

Q1. Tempo Company has 20,000 units of its product that were produced at a cost of $300,000. The units were damaged in a rainstorm. Tempo can sell the units as scrap for $40,000, or it can rework the units at a cost of $76,000 and then sell them for $100,000. If Tempo Company reworks the units, incremental income will be:

A) $24,000

B) $16,000

C) $(16,000)

D) $64,000

Q2. Riener Hospital has an x-ray machine with a book value of $60,000 and a remaining useful life of three years. At the end of the three years the equipment will have a zero-salvage value. Reiner can sell the old machine now for $32,000 and can purchase a new machine for $145,000. The old machine has variable manufacturing costs of $50,000 per year. The new machine will reduce variable manufacturing costs by $27,000 per year over the three-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:

A) $18,000 decrease

B) $76,000 increase

C) $32,000 decrease

D) $52,000 increase

Q3. Walter Farms has already spent $10,000 to harvest vegetables. The vegetables can be sold as is for $180,000. Instead, the company could incur further processing costs of $96,000 and process the vegetables into salsa. The resulting salsa can be sold for $252,000. The incremental income to sell the vegetables 'as is' is

A) $24,000 higher than the income from processing further into salsa.

B) $72,000 higher than the income from processing further into salsa.

C) $72,000 lower than the income from processing further into salsa.

D) $24,000 lower than the income from processing further into salsa.