Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 19,000 monitors from an outside supplier for $209 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 19,000 monitors:

Total cost of producing Total

19,000 monitors

Unit cost

Direct materials $ 2,223,000 $ 117

Direct labor 1,349,000 71

Variable factory overhead 589,000 31

Fixed manufacturing overhead 513,000 27

Fixed non-manufacturing overhead 741,000 39

$ 5,415,000 $ 285

You are asked to look over the intern's estimate before the information is shared with members of management who will decide to continue to make the monitors or buy them. The company's controller believes that the estimate may be incorrect because it includes costs that are not relevant. If Zee-Drive buys the monitors, the direct labor force currently employed in producing the monitors will be terminated and there would be no termination costs incurred. There are no materials on hand and no commitments to suppliers to purchase materials, so all materials would need to be purchased to make the monitors. Variable overheads are avoidable if monitors are bought. Fixed manufacturing overhead costs would be reduced by $55,100, but non-manufacturing costs would remain the same if monitors are bought.

Fill in the differential analysis.

Purchase price 19000 Monitors $___________

Differential cost to make:

Direct Material $_________

Direct Labor ___________

Overhead ____________ _____________

Differential income (loss) from making monitors $____________

Skiles Coporation is a manufacturer of classic rocking chairs. The company has been using a particular sanding and finishing machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a wise economic decision. The company's controller pulled together the following information on the old machine and the new possible replacement machine.

Old Machine:

Original cost $453,400

Current accumulated depreciation 302,800

Estimated annual variable manufacturing costs for machine 74,300

Estimated selling price of machine 157,600

Estimated remaining useful life (in years) 6

New Machine:

Purchase cost $787,800

Estimated annual variable manufacturing costs for machine 49,900

Estimated residual value 0

Estimated useful life (in years) 6

Select the relevant or irrelevant information below:

Cost of replacing old machine:

Annual differential decrease in cost $___________

x Number of years _____________

Total Different decrease in cost _____________

Proceeds from sales of present machine ____________ $____________

Cost of new machine ____________

Net differential (increase/decrease in cost, six year total $_____________