DeCesare Computers makes  5000 units of a circuit​ board, CB76 at a cost of  $280 each. Variable cost per unit is  $170 and fixed cost per unit is $110. Peach Electronics offers to supply  5000 units of CB76 for $260. If  buys from Peach it will be able to save  $15 per unit in fixed costs but continue to incur the remaining  $95 per unit. Should  DeCesare accept​ Peach's offer? Explain.

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 7EB: Delta Co. sells a product for $150 per unit. The variable cost per unit is $90 and fixed costs are...
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DeCesare Computers makes  5000 units of a circuit​ board, CB76 at a cost of  $280 each. Variable cost per unit is  $170 and fixed cost per unit is $110. Peach Electronics offers to supply  5000 units of CB76 for $260. If  buys from Peach it will be able to save  $15 per unit in fixed costs but continue to incur the remaining  $95 per unit. Should  DeCesare accept​ Peach's offer? Explain. 

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

Old Machine       New Machine
Original cost
$10,400                $9,200
Useful life
13 years                3 years
Current age
10 years                 0 years
Remaining useful life
3 years                    3 years
Accumulated depreciation
$8,000                       Not acquired yet
Book value
$2,400                        Not acquired yet
Current disposal value (in cash)
$2,000                         Not acquired yet
Terminal disposal value (3 years from now)
$0                                  $0
Annual cash operating costs
$18,500                          $13,000
 
TX Manufacturing uses​ straight-line depreciation. Ignore the time value of money and income taxes. Should
TX Manufacturing replace the old​ machine? Explain.
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