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:
Variable factory overhead56,000
Fixed factory overhead94,000
The idle facilities could also be rented out at an annual rent of $36,000. All the factory overhead costs are avoidable.
Required: Determine if Wykle should continue to buy the part or produce it in house.
109) The Martin Company is considering the replacement of a machine that is presently used in the production of its product. The following data are available:
Old Machine Machine
Useful life in years157
Current age in years80
Book value$ 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