108) Wykle Company purchases 10,000 units of a part that it needs for production of its product. Notification has just been received from the supplier that a price increase will take effect shortly which will bring the price of each part to $30. Wykle is considering using some idle facilities to produce the part. The production costs to produce the needed 10,000 parts are as follows:

Direct materials$70,000

Direct labour80,000

Variable factory overhead56,000

Fixed factory overhead94,000

The idle facilities could also be rented out at an annual rent of $36,000. All the factory overhead costs are avoidable.

Required: Determine if Wykle should continue to buy the part or produce it in house.

109) The Martin Company is considering the replacement of a machine that is presently used in the production of its product. The following data are available:


Old Machine  Machine

Original cost$200,000$120,000

Useful life in years157

Current age in years80

Book value$   90,000-

Disposal value now$   56,000-

Disposal value in 7 years00

Annual cash operating costs$   24,00$ 18,000

Required: Ignoring income taxes, prepare a cost comparison of all relevant items for the next seven years to

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