Relevant and irrelevant costs. Answer the following questions.

1. Dalton computers makes 5,000 units of a circuit board, CB76 at a cost of $230 each. Variable cost pa? unit is $180 and fixed cost per unit is $50. Peach Electronics offers to supply 5,000 units of CB76 for $210 If Dalton buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Dalton accept Peach?s offer? Explain.

2. AP Manufacturing is deciding whether to keep or replace an old machine. It obtains the following; information:

AP Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should AP Manufacturing replace the old machine?Explain.

Old Machine New Machine $10,000 $8,000 Original cost 10 years 4 years Useful life O years Current age 6 years 4 years 4 years Remaining useful life Not acquired yet Accumulated depreciation $6,000 Not acquired yet $4,000 Bock value Not acquired yet $2,500 Current disposal value (in cash) $0 $0 Terminal disposal value (4 years from now) Annual cash operating costs $20,000 $12,000