A. A salesmen comes with a new pen machine.It cost $218,000 and can make 5000 pens a day(twice the capacity of the current machines). Has an expected life of 4 years. Should the company buy the new machine and why? (Hint: see Q's B and C before spending to much time on A)B. What other info would be relevant to answering the question above?C. Extra info:Old machines can be sold for $33,000 a piece In 4 years from now they can be sold for $2,000 a piece as scrapFactory worker labor will be reduced to $38,400 for each new machine that is purchased and replaces 2 old machines.The new machine can be sold for scrap in 4 years for $5000 a piece.Should you buy the new machine or not and why?D. Does the answer change if you have to borrow money to buy the new machine and there will be $5000 in interest loans?

Straight Lines Pen & Ink Relevant Costs in Decision Making Straight Lines Pen & Ink (SLap) produces one style and collar of pens-black tubular pens. SLap 4,800,000 pens per year, but its relevant range is 3,600,000 to 6,000,000. Below is a cost summary for producing the pens, which are sold to retailers for $1.00 each. COSTS Decision making using Relevant Information Labor Behave Costs Costs Factory Workers (Hourly) Var per (100 employees @ 10 per hour) $1,920,000 per yr $160,000 month 5 Production Supervisors (Salary) Fix per $ 180,000 per yr $15,000 month Plant Manager (Salary) per Fix Materials $ 60,000 per yr $5,000 month Pen Hardware Var $ 0.20 per pen Ink Var 0.05 per pen Overhead per 2 Factory Depreciation Fix $ 1,920,000 $48,000 per yr $4,000 month Accumulated Depreciation $ (240,000) per 3 Equipment Depreciation Fix $ 960,000 $96,000 per yr $8,000 month Accumulated Depreciation $ (480,000) per Utilities Var $60,000 per yr $5,000 month per Other Miscellaneous Fix $36,000 per yr $3,000 month Other per Sales & Administrative Fix $600,000 per yr $50,000 month Assume that labor costs relate to the operation of the 10 machines used to make pens ratably. 2 The factory is being depreciated over 40 years using a straight-line method. The estimated residual value for depreciation purposes is 0. 3 The factory has 10 machines used to produce pens. They have an estimated life of 10 years. The estimated residual value for depreciation purposes is 0. Required: Answer the following questions regarding Straight Lines Pen & Ink Company. 47