Should LF Manufacturing replace the old machine

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Reference no: EM132665695

Dietrich Computers makes 5,600 units of a circuit board, CB76 at a cost of $240 each. Variable cost per unit is $190 and fixed cost per unit is $50. Peach Electronics offers to supply 5,600 units of CB76 for $220. If Dietrich buys from Peach it will be able to save $25 per unit in fixed costs but continue to incur the remaining $25 per unit. Should Dietrich accept Peach's offer? Explain.

LF Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: LF Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes.

Problem 1: Should LF Manufacturing replace the old machine? Explain.

Problem 2: Dietrich Computers makes 5,600 units of a circuit? board, CB76 at a cost of $240 each. Variable cost per unit is $190 and fixed cost per unit is $50. Peach Electronics offers to supply 5,600 units of CB76 for $220. If Dietrich buys from Peach it will be able to save $25 per unit in fixed costs but continue to incur the remaining $25 per unit. Should Dietrich accept? Peach's offer? Explain.

Reference no: EM132665695

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