Required : i . According to the company ' s accounting system , what is the net operating income earned by product S85U ? Show your work ! ii . What would be the effect on the company ' s overall net operating income of dropping product S85U ? Should the product be dropped ? Show your work ! Question 4 . Question : ( TCO D ) Rosiek Corporation uses part A55 in one of its products . The company ' s accounting department reports the following costs of producing the 4,000 units of the part that are needed every year . Per Unit Direct Materials $ 2.80 Direct Labor $ 6.30 Variable Overhead $ 8.50 Supervisor ' s Salary $ 2.60 Depreciation of Special Equipment $ 6.80 Allocated General Overhead $ 6.10 An outside supplier has offered to make the part and sell it to the company for $ 32.30 each . If this offer is accepted , the supervisor ' s salary and all of the variable costs , including direct labor , can be avoided . The special equipment used to make the part was purchased many years ago and has no salvage value or other use . The allocated general overhead represents fixed costs of the entire company . If the outside supplier ' s offer were accepted , only $ 4,000 of these allocated general overhead costs would be avoided . In addition , the space used to produce part A55 could be used to make more of one of the company ' s other products , generating an additional segment margin of $ 26,000 per year for that product . Required : i . Prepare a report that shows the effect on the company ' s total net operating income of buying part A55 from the supplier rather than continuing to make it inside the company .
ii . Which alternative should the company choose ?
Question 5 . Question : ( TCO D ) A customer has asked Clougherty Corporation to supply 4,000 units of product M97 , with some