Differential Analysis 1. Badonsky Manufacturing needs to obtain a gear-cutting machine, which can be purchased for $75,000. Badorsky estimates that repair, maintenance, insurance, and property tax expense will be $20,000 for the machine's five-year life. At the end of the machine's life, it will have no salvage value. As an alternative, Badonsky can lease the machine for five years for $18,000 per year. If the machine is leased, Badorsky is required to pay only for routine maintenance on the machine, which is estimated to be $8,000 over the machine's life. All other costs will be paid by the lessor. Prepare a differential analysis to determine whether Badonsky should purchase or lease the machine. 2. Grayson Enterprises currently manufactures part A-14, one of the component parts used to assemble the company's main product. Specialty Paris has offered to make part A-14 for $12.50 per unit. Grayson's per-unit cost to make part A-14 is $14.75, as follows: Direct materials $5.00 Direct labor 6.00 Variable factory overhead 1.75 Foced factory overhead 2.00 None of Grayson's fixed overhead costs will be eliminated if the part is purchased. However, the plant space currently used to manufacture the part can be leased to another company for $30,000 per year. Assuming that Grayson needs 100,000 parts per year, should the company continue to make part A-14 or buy it? 3. Apple Valley Orchards sells apples for $15.00 per bushel. The company has considered processing some of its apples into apple butter. Each bushel of apples will yield two dozen jars of apple butter, which can be sold for $1.50 per jar. The additional cost to process the apples into apple butter is $0.75 per jar. Use differential analysis to determine whether Apple Valley Orchards should make the apple butter. 4. Gooding Foods makes Goody-Goody brand peanut butter. The cost to make each jar is $2.05 and consists of the following: Direct materials $1.00 Direct labor 0.25 Variable factory overhead 0.30 Fixed factory overhead 0.50 A grocery store chain wants to purchase a generic brand peanut butter from Gooding and is willing to pay $1.50 per jar. The generic peanut butter will be made using a different recipe, lowering the direct materials cost to $0.80 per jar. Gooding can produce this special order using excess capacity; therefore, fixed costs will not increase. Use differential analysis to determine whether Gooding should accept this special order