Tutorial 7 2102.docx - Tutorial 7 11-22 Relevant and irrelevant costs Answer the following questions 1 DeCesare Computers makes 5,200 units of a circuit

Tutorial 7 2102.docx - Tutorial 7 11-22 Relevant and...

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Tutorial 7 11-22 Relevant and irrelevant costs. Answer the following questions. 1. DeCesare Computers makes 5,200 units of a circuit board, CB76, at a cost of $280 each. Variable cost per unit is $190 and fixed cost per unit is $90. Peach Electronics offers to supply 5,200 units of CB76 for $260. If DeCesare buys from Peach it will be able to save $10 per unit in fixed costs but continue to incur the remaining $80 per unit. Should DeCesare accept Peach’s offer? Explain. 2. LN Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: LN Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should LN Manufacturing replace the old machine? Explain. 11-28 Selection of most profitable products. Isochlorine is produced in a chemical process that is very threatening to the environment. As a result of this, the government has limited the yearly production. Company Soleil uses isochlorine to produce four cosmetic products A, B, C, and D. Soleil has an inventory of 2,000 kg of isochlorine at a value of $20,000. As a result of production restrictions imposed on their supplier, Soleil will not be able to purchase additional isochlorine during the coming period. Although Soleil, by means of its commercial campaign, suggests that its main goal is to let people experience the sanitary effects of its cosmetic products, the management is only interested in profit maximization. The management of Soleil must decide how to use the scarce material.
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