1. DeCesare Computers makes 5,200 units of a circuit board, CB76, at a cost of $280 each. Variable cost per unit is $190 and fixed cost per unit is $90. Pinnacle Electronics offers to supply 5,200 units of CB76 for $260. If DeCesare buys from Pinnacle, it will be able to save $10 per unit in fixed costs but continue to incur the remaining $80 per unit. Should DeCesare accept Pinnacle’s offer? Explain.
2. LN Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information:

LN Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. 

Should LN Manufacturing replace the old machine? Explain.

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Original cost Useful life Current age Remaining useful life Accumulated depreciation Book value Current disposal value (in cash) Terminal disposal value (3 years from now) Annual cash operating costs Old Machine $10,700 10 years 7 years 3 years $ 7,490 $ 3,210 $ 2,200 $ 0 $17,500 New Machine $ 9,000 3 years 0 years 3 years Not acquired yet Not acquired yet Not acquired yet $0 $15,500