Question

1.

DeglerDegler

Computers makes

5 comma 9005,900

units of a circuit​ board, CB76 at a cost of

$ 230$230

each. Variable cost per unit is

$ 190$190

and fixed cost per unit is

$ 40$40.

Peach Electronics offers to supply

5 comma 9005,900

units of CB76 for

$ 210$210.

If

DeglerDegler

buys from Peach it will be able to save

$ 15$15

per unit in fixed costs but continue to incur the remaining

$ 25$25

per unit. Should

DeglerDegler

accept​ Peach's offer? Explain.

2.

APAP

Manufacturing is deciding whether to keep or replace an old machine. It obtains the following​ information:

$

$

$

$

$

$

$

$

$

1.

DeglerDegler

Computers makes

5 comma 9005,900

units of a circuit​ board, CB76 at a cost of

$ 230$230

each. Variable cost per unit is

$ 190$190

and fixed cost per unit is

$ 40$40.

Peach Electronics offers to supply

5 comma 9005,900

units of CB76 for

$ 210$210.

If

DeglerDegler

buys from Peach it will be able to save

$ 15$15

per unit in fixed costs but continue to incur the remaining

$ 25$25

per unit. Should

DeglerDegler

accept​ Peach's offer? Explain.

Begin by calculating the relevant cost per unit. ​(If an input field is not used in the​ table, leave the input field​ empty; do not enter a​ zero.)

	Make	Buy
Relevant costs:
Unit relevant cost

Answer 1

Ans:

	Make	Buy
Relevant Cost:
Variable Cost	$190
Avoidable Fixed Cost	$15
Purchase Price		$210
Unit Relevant Cost	$ 205	$ 210

Explanation:

Degler Computers should reject Peach’s offer. The $25 of fixed costs is irrelevant because it will be incurred regardless of this decision. When comparing relevant costs between the choices, Peach’s offer price is higher than the cost of making.