Zee-Drive Ltd. is a computer manufacturer. One of the items they make is monitors. Zee-Drive has the opportunity to purchase 18,000 monitors from an outside supplier for $203 per unit. One of the company's cost-accounting interns prepared the following schedule of Zee-Drive's cost to produce 18,000 monitors:

	Total cost of producing 18,000 monitors		Unit cost
Direct materials	$	2,124,000	$	118
Direct labor		1,206,000		67
Variable factory overhead		558,000		31
Fixed manufacturing overhead		540,000		30
Fixed non-manufacturing overhead		756,000		42
	$	5,184,000	$	288

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 $48,300, but non-manufacturing costs would remain the same if monitors are bought.

Fill in the differential analysis.

Make or Buy Decisions Differential Analysis Report
Purchase price of 18,000 monitors		$
Differential cost to make:
Direct materials	$
Direct labor
Overhead
Differential income (loss) from making monitors		$

Keep or Replace Machine:

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	$445,200
Current accumulated depreciation	317,900
Estimated annual variable manufacturing costs for machine	71,700
Estimated selling price of machine	155,000
Estimated remaining useful life (in years)	6
New Machine:
Purchase cost	$796,600
Estimated annual variable manufacturing costs for machine	48,100
Estimated residual value	0
Estimated useful life (in years)	6

Fill in the differential analysis.

Replace or Keep Decision Differential Analysis Report
Cost of replacing old machine:
Annual differential decrease in cost	$
x number of years
Total differential decrease in cost
Proceeds from sale of present machine		$
Cost of new machine
Net differential (increase)/decrease in cost, six year total		$