A manager at White Co. wants to replace an old machine with a new, more efficient machine.

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• White's sales are $200,000 per year.
• Fixed expenses, other than depreciation, are $70,000 per year.

Should the manager purchase the new machine? Relevant Cost Analysis for your answer.

Problem #9 Chapter 9

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• Essex manufactures part 4A that is currently used in one of its products.
• The cost per unit of this part is:

• The special equipment used to manufacture part 4A has no resale value.
• The total amount of general factory overhead, which is allocated on the basis of direct labour hours, would be unaffected by this decision.
• The $30 total cost per unit is based on 20,000 parts produced each year.
• An outside supplier has offered to provide the 20,000 parts at a cost of $25 per part.
• Should we accept the supplier's offer?