Reference no: EM132516928

Problem 1: Last month, Vision Chemical spent $175,000 to refine 45,000 litres of acetone, which can be sold as is for $5.00 per litre. Vision has the option to process the acetone further to yield a total of 38,000 litres of lacquer thinner that can be sold for $3.00 per half-litre. The additional processing cost is 45 cents per litre of acetone. Also, Vision must pay shipping of 10 cents per litre of lacquer thinner and additional packaging costs of 8 cents per litre for the lacquer thinner. What is the expected net revenue if Vision Chemical decides to process the acetone further?

A. $90,060

B. $86,910

C. $200,910

D. $25,910

E. $204,060

Problem 2: Rabbit Corporation is considering whether to discontinue its lucky rabbit's foot division that generates a total contribution margin of $32,700 per year. Fixed manufacturing overhead allocated to this division is $41,500, of which $11,000 is unavoidable. If Rabbit were to eliminate this division, what effect would it have on their overall operating income?

A. Total operating income would decrease by $13,200

B. Total operating income would decrease by $ 2,200

C. Total operating income would increase by $19,500

D. Total operating income would decrease by $21,700

E. Total operating income would decrease by $19,800