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ABC Corporation manufactures a product that has two parts, A and B. It is currently considering two alternative proposals related to these parts: The first
ABC Corporation manufactures a product that has two parts, A and B. It is currently considering two alternative proposals related to these parts: The first proposal is for buying Part A. This would free up some of the plant space for the manufacture of more of Part B and assembly of the final product. The product vice president believes the additional production of the final product can be sold at the current market price. No other changes in manufacturing would be needed. The second proposal is for buying new equipment for the production of Part B. The new equipment requires fewer workers and uses less power to operate. The old equipment has a net disposal value of zero. Tell whether the cost of new equipment for manufacturing Part B is relevant (R) or irrelevant (I) for Proposal 1 and Proposal 2, respectively. R and R R and I I and R I and
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