(Solved): Novak Manufacturing incurs unit costs of $7.00 ( $5.00 variable and $2.00 fixed) in making a sub-as ...

Novak Manufacturing incurs unit costs of $\$7.00$ ( $\$5.00$ variable and $\$2.00$ fixed) in making a sub-assembly part for its finished product. A supplier offers to make 12,500 of the parts for $\$5.60$ per unit. If it accepts the offer, Novak will save all variable costs and $\$1.00$ of fixed costs. Prepare an analysis showing the total cost savings, if any, that Novak will realize by buying the part. (Round per unit answers to 2 decimal places, e.g. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number, e.g. $-15,000$ or parenthesis, e.g. $(15,000)$. Wildhorse Company has a factory machine with a book value of $\$161,000$ and a remaining useful life of 6 years. A new machine is available at a cost of $\$251,500$. This machine will have a 6-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $\$599,500$ to $\$499,000$. Prepare an analysis that shows whether Wildhorse should retain or replace the old machine. (If an amount reduces the net income then enter with a negative sign preceding the number or parenthesis, e.g. $-15,000,(15,000)$.)