4. The ABC Company incurs $14 of variable costs and $6 of allocated fixed costs to produce a toaster that sells for $30. A buyer in France offers to purchase 3,000 units at $18 each. The ABC Company has excess capacity and can handle the additional production.

Calculate the effect the acceptance of the offer will have on net income and advise if the ABC Company should accept the offer.

8. The ABC Company has a machine that scans labels to packages. The machine has a book value of $80,000 and a remaining useful life of 3 years and a $5,000 salvage value. A new, more efficient machine is available at a cost of $280,000 that will have a 3-year useful life with no salvage value at the end. The new machine will lower annual variable production costs from $520,000 to $400,000 and take up less floor space.

Prepare an analysis showing whether the old machine should be retained or replaced