1.)

Quail Co. can further process Product B to produce Product C. Product B is currently selling for $60 per pound and costs $42 per pound to produce. Product C would sell for $92 per pound and would require an additional cost of $13 per pound to produce. What is the differential revenue of producing and selling Product C?

a. $32 per pound

b. $18 per pound

c. $50 per pound

d. $42 per pound

2.)

Lockrite Security Company manufacturers home alarms. Currently it is manufacturing one of its components at a total cost of $45 which includes fixed costs of $15 per unit. An outside provider of this component has offered to sell them the component for $40.

Provide a differential analysis of the outside purchase proposal.

Differential cost to purchase:
SelectPurchase price of the componentVariable manufacturing costsItem 1	$
Differential cost to manufacture:
SelectPurchase price of the componentVariable manufacturing costsItem 3	$
Cost savings from continuing to make the component	$

3.)

An oven with a book value of $67,000 has an estimated 5 year life. A proposal is offered to sell the oven for $8,500 and replace it with a new oven costing $110,000. The new machine has a five year life with no residual value. The new machine would reduce annual maintenance costs by $23,000.

Provide a differential analysis on the proposal to replace the machine.

Annual maintenance cost reduction	$
Number of years applicable
Total differential decrease in cost	$
Proceeds from sale of equipment		$
Cost of new equipment
Net differential decrease in cost from replacing equipment		$