Relevant and irrelevant costs. Answer the following questions.Robinson Computers makes 5,700 units of a circuit board, CB76, at a cost of $230 each. Variable cost per unit is $180 and fixed cost per unit is $50. Peach Electronics offers to supply 5,700 units of CB76 for $210. If Robinson buys from Peach, it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Robinson accept Peach’s offer? Explain.RT Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: Old MachineNew MachineOriginal cost$10,800$8,800Useful life9 years4 years5 yearsS4,8005 yearsO yearsCurrent ageRemaining useful lifeAccumulated depreciation5 yearsNot acquired yetNot acquired yetNot acquired yetBook valueS6,000Current disposal value (in cash)Terminal disposal value (5 years from now)Annual cash operating costs$2,800SO$15,000$0$18,000RT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes.Should RT Manufacturing replace the old machine? Explain.

Old Machine New Machine Original cost $10,800 $8,800 Useful life 9 years 4 years 5 years S4,800 5 years O years Current age Remaining useful life Accumulated depreciation 5 years Not acquired yet Not acquired yet Not acquired yet Book value S6,000 Current disposal value (in cash) Terminal disposal value (5 years from now) Annual cash operating costs $2,800 SO $15,000 $0 $18,000 RT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should RT Manufacturing replace the old machine? Explain.

Old Machine New Machine Original cost $10,800 $8,800 Useful life 9 years 4 years 5 years S4,800 5 years O years Current age Remaining useful life Accumulated depreciation 5 years Not acquired yet Not acquired yet Not acquired yet Book value S6,000 Current disposal value (in cash) Terminal disposal value (5 years from now) Annual cash operating costs $2,800 SO $15,000 $0 $18,000 RT Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should RT Manufacturing replace the old machine? Explain.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 5P

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