The following information is available for the next three (3) questions: Carbo Industries manufactures a component with the following costs: Unit-level material $45 Unit-level labor 90 Unit-level overhead 30 Facility-level overhead 60 Total cost per unit 225

Carbo uses 600 of the components each year. Agent Suppliers has offered to sell the component to Carbo for $202.50 each. Some members of management felt they could reduce costs by buying from Agent. If the component was purchased, Carbo could lease unused production facilities to a non-competing manufacturer for $9,000 per year. 10. What is the relevant cost of making the component? a. $135 b. $165 c. $180 d.$224

11. If Carbo decides to purchase the 600 components that it currently makes, net income will a. increase by $13,500 b.decrease by $13,500 C.increase by $17,500 d.decrease by $17,500

12. Carb Company should. a. continue to manufacture the component b. purchase the components to obtain a savings of $13,500 c. purchase the components if Agent reduces the price to $190 d. purchase the components at the offered price of $202.49

XYZ Company is considering the replacement of a piece of manufacturing equipment. The old equipment originally cost $120,000. This equipment has a book value of $60,000 and a market value of $29,000. It has a remaining useful life of 4 years and a zero salvage value. Operating expenses for the old equipment are expected to be $9,000 per year. The new equipment has a purchase price of $54,000. It is expected to have a useful life of 4 years and a salvage value of $4,000. Operating expenses for the new equipment are expected to be $5,000 a year. If the old machine is replaced profitability will a.increase by $5,000 over the next four years. b.decrease by $5,000 over the next four years. C. increase by $9,000 over the next four years. d. decrease by $9,000 over the next four years.