1. Robinson Computers makes 5,700 units of a circuit board, CB76, at a cost of $230 each. Variable cost per unit is $180 and fixed cost per unit is $50. Peach Electronics offers to supply 5,700 units of CB76 for $210. If Robinson buys from Peach, it will be able to save $20 per unit in fixed costs but continue o incur the remaining $30 per unit. Should Robinson accept Peach's offer? Explain.

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

RT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should RT 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 (5 years from now) Annual cash operating costs Old Machine $10,800 9 years 4 years 5 years $4,800 $6,000 $2,800 $0 $18,000 New Machine $8,800 5 years 0 years 5 years Not acquired yet Not acquired yet Not acquired yet SO $15,000 Original cost Useful life Current age Remaining useful life Accumulated depreciation Book value Current disposal value (in cash) Terminal disposal value (5 years from now) Annual cash operating costs Old Machine $10,800 9 years 4 years 5 years $4,800 $6,000 $2,800 $0 $18,000 New Machine $8,800 5 years 0 years 5 years Not acquired yet Not acquired yet Not acquired yet SO $15,000

Answer rating: 100% (QA)

Relevant and Irrelevant Costs Relevant costs are the expected future costs that differ among the alternative courses of action being considered Irrele... View the full answer