Question

Required 1. Dowling Computers makes 5,200 units of a circuit board, CB76, at a cost of $200 each. Variable cost per unit is $150 and fixed cost per unit is $50. HT Electronics offers to supply 5,200 units of CB76 for $185. If Dowling buys from HT it will be able to save $15 per unit of fixed costs but continue to incur the remaining $35 per unit. Should Dowling accept HT's offer? Explain. 2. RT Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: E: (Click the icon to view the information.) RT Manufacturing uses straight-line amortization. Ignore the time value of money and income taxes. Should RT replace the old machine? Explain. Requirement 1. Dowling Computers makes 5,200 units of a circuit board, CB76, at a cost of $200 each. Variable cost per unit is $150 and fixed cost per unit is $50. HT Electronics offers to supply 5,200 units of CB76 for $185. If Dowling buys from HT it will be able to save $15 per unit of fixed costs but continue to incur the remaining $35 per unit. Should Dowling accept HT's offer? Explain. Begin by calculating the relevant cost per unit. (Only complete the necessary answer boxes.) Make Buy 's 150 Relevant costs: Variable costs per unit Avoidable fixed costs per unit Purchase price per unit $ 185 $ 165 $ 185 Unit relevant cost Dowling Computers should reject HT's offer. When comparing relevant costs between the choices, HT's offer price is higher than the cost to continue to produce.

Answer 1

Regreeidement 1- Cost f 5,200 Units Cost Pర Make $ Buy Porochase poie 185 962,000 vaiable cost 150 780,000 Ffxed Cost (78,000) 50 TOtal Cost 200 780,000 884,000 DecPson Duding should Rejek HTb ffeo Regreivenante: keep, Replace dffeoene Foo 5 yeaos C18,0015) CIS,0Ox) 92,500 77500 Cash Costs opooatng 15,000 Ceeroent diopsal valee of 2,900 C2A00) Old machfne. ( 8, 200) COt of Neco machAne 8,200 Totol Relavat Costs 9700 92,500 82,800 Decbion'- keep the old machine