3-

BT&T Corporation manufactures telephones. Recently, the company produced a batch of 640 defective telephones at a cost of $9,400. BT&T can sell these telephones as scrap for $10 each. It can also rework the entire batch at a cost of $6,900, after which the telephones could be sold for $21 per unit.

If BT&T reworks the defective telephones, by how much will its operating income change?

4-

Seidman Company manufactures and sells 39,000 units of product X per month. Each unit of product X sells for $14 and has a contribution margin of $5. If product X is discontinued, $61,000 in fixed monthly overhead costs would be eliminated and there would be no effect on the sales volume of Seidman Company's other products. If product X is discontinued, Seidman Company's monthly income before taxes should:

5-

Express, Incorporated, is considering replacing equipment. The following data are available:

	Old Equipment	Replacement Equipment
Original cost	$ 60,000	$ 49,000
Disposal value now	$ 9,000	$ 0
Disposal value in 5 years	$ 0	$ 0
Annual cash operating costs	$ 10,000	$ 9,000

What are the total relevant costs of keeping the old equipment?