Posted: May 4th, 2016

Determine operating income for Grant Corporation as a whole if the Roach Division is dropped??

24. Strategic objectives of JIT include
a. increasing profits.
b. improving a firm’s competitive position.
c. increasing inventory.
d. both a and b.

25. The objectives of JIT are achieved by
a. controlling costs.
b. improving delivery performance.
c. improving quality.
d. all of these.

SECTION II

1. The operations of Grant Corporation are divided into the Fix Division and the Roach Division. Projections for the next year are as follows:

Fix Roach
Division Division Total
Sales $60,000 $ 40,000 $100,000
Variable costs 20,000 15,000 35,000
Contribution margin $40,000 $ 25,000 $ 65,000
Direct fixed costs 12,500 30,000 42,500
Segment margin $27,500 $ (5,000) $ 22,500
Allocated common costs 10,000 7,500 17,500
Operating income (loss) $17,500 $(12,500) $ 5,000

Required:

a. Determine operating income for Grant Corporation as a whole if the Roach Division is dropped.
b. Should the Roach Division be eliminated?

2. The management of James Industries has been evaluating whether the company should continue manufacturing a component or buy it from an outside supplier. A $200 cost per component was determined as follows:

Direct materials $ 15
Direct labor 40
Variable manufacturing overhead 10
Fixed manufacturing overhead 35
Total $100

James Industries uses 4,000 components per year. After Light, Inc., submitted a bid of $80 per component, some members of management felt they could reduce costs by buying from outside and discontinuing production of the component. If the c