Question 1: The cost to produce Part A was $20 per unit in 2012. During 2013, it has increased to $23 per unit. In 2013, Supplier Company has offered to supply Part A for $18 per unit. For the make-or-buy decision,
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a)incremental revenues are $5 per unit.
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b)net relevant costs are $3 per unit.
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c)differential costs are $5 per unit.
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d)incremental costs are $3 per unit.
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Question 2: Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered:
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Old Machine
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New Machine
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| Price |
$300,000 |
$600,000 |
| Accumulated Depreciation |
90,000 |
-0- |
| Remaining useful life |
10 years |
-0- |
| Useful life |
-0- |
10 years |
| Annual operating costs |
$240,000 |
$180,600 |
If the old machine is replaced, it can be sold for $24,000.
Which of the following amounts is relevant to the replacement decision?