Relevant and irrelevant costs. Answer the following questions.

1, Unit relevant cost, $200 REQUIRED 1. Dalton Computers makes 5,000 units of a circuit board, CB76, at a cost of $230 each.

CHAPTER 11 ; Variable cost per 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 of fixed costs but continues 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 amortization. Ignore the time value of money and income taxes. Should AP replace the old machine? Explain.LO1

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