Theory of constraints, throughput contribution, relevant costs. The Mayfield Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information.

Each cabinet sells for $72 and has direct material costs of $32 incurred at the start of the machining operation. Mayfield has no other variable costs. Mayfield can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements.
Required
1. Mayfield is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,000 units. The annual cost of these jigs and tools is $30,000. Should Mayfield acquire these tools? Show your calculations.
2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 10,000 units and cost $5,000 per year. Should Mayfield implement the change? Show your calculations.

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Machining Finishing Annual capacity Annual production Fixed operating costs 100,000 units 80,000 units $640,000 80,000 units 80,000 units $400,000 (excluding direct materials) Fixed operating costs per unit produced ($640,000 ÷ 80,000: $400,000+ 80,000) S8 per unit $5 per unit