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Question 3: (10 marks) (B1, C3) Part A: (4 marks) Ahlia Computers makes 5.200 units of a circuit board, CB76, at a cost of $280
Question 3: (10 marks) (B1, C3) Part A: (4 marks) Ahlia Computers makes 5.200 units of a circuit board, CB76, at a cost of $280 each. Variable cost per unit is $190 and fixed cost per unit is 590. Zain Electronics offers to supply 5.200 units of CB76 for $260. If Ahlia buys from Zain, it will be able to save $10 per unit in fixed costs but continue to incur the remaining S80 per unit. Should Ahlia accept Zain's offer? Explain Part B: (6 marks) Bahrain Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: Old Machine New Machine Original cost S10,700 9,000 Useful life 10 years 3 years 7 years O years Current age Remaining useful life 3 years $7,490 Accumulated depreciation 3 years Not acquired yet Not acquired yet Not acquired yet Book value Current disposal value in cash) Terminal disposal value (3 years from now) Annual cash operating costs $3,210 $2,200 SO $17.500 $15,500 Bahrain Manufacturing uses straight-line depreciation. Ignore the time value of money and Income taxes. Should Bahrain Manufacturing replace the old machine? Explain
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