Excerpt from Areojet Corporation records for month of February: Per Unit Per Month
Selling price $ 200,000
Direct materials used in production 40,000
Direct labor 10,000
Variable manufacturing overhead 2,000
Fixed manufacturing overhead $ 120,000
Variable selling and administrative expenses 20,000
Fixed selling and administrative expenses 40,000
February
Beginning Inventory 0
Units Produced 3
Units Sold 3
Ending inventory 0
Assuming the absorption costing method is used, what is the total manufacturing costs added to work in process during the month of February?
a) $52,000
b) $92,000
c) $87,000
d) $122,000

P8-4b dropping unfavorable division based on the following analysis of last year's operations of groves, inc., a financial vice president of the company believes that the firm's total net income could be increased by $160,000 if its design division were discontinued. (amounts are given in the thousands of dollars.) required provide answers for each of the following independent situations: a. assuming that total fixed costs and expenses would not be affected by discontinuing the design division, prepare an analysis showing why you agree or disagree with the vice president. b. assume that the discontinuance of the design division will enable the company to avoid 30% of the fixed portion of cost of services and 40% of the fixed operating expenses allocated to the design division. calculate the resulting effect on net income. c. assume that in addition to the cost avoidance in requirement (b), the capacity released by discontinuance of the design division can be used to provide 6,000 new services that would have a variable cost per service of $60 and would require additional fixed costs totaling $68,000. at what unit price must the new service be sold if groves is to increase its total net income by $180,000?