Mighty Safe Fire Alarm is currently buying 58,000 motherboards from MotherBoard, Inc. at a price of $68 per board. Mighty Safe is considering making its own motherboards. The costs to make the motherboards are as follows: direct materials, $30 per unit; direct labor, $9 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $90,000. Which option should be selected and why?

a. buy, $90,000 more in profits

b. buy, $664,100 more in profits

c. make, $664,100 increase in profits

d. make, $754,000 increase in profits

Keating Co. is considering disposing of equipment with a cost of $52,000 and accumulated depreciation of $36,400. Keating Co. can sell the equipment through a broker for $26,000, less a 10% broker commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is

a. $17,520

b. $10,220

c. $21,900

d. $14,600