Microsoft Company has a machine that affixes labels to bottl…

Microsoft Company has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years. If the company continues to use the current machine, it would require $10,000 in additional repair costs. A new, more efficient machine is available at a cost of $300,000 that will have a 3-year useful life with no salvage value. Additionally, the new machine will lower annual variable production costs from $520,000 to $410,000. If the current machine is sold, the company would receive a trade-in value of $6,000. What is the increase or (decrease) in net income that would result from purchasing the new machine?

The University’s Bookstore manufactures and sells t-shirts e…

The University’s Bookstore manufactures and sells t-shirts externally for $24.50 per shirt. Its unit variable costs are $16 and unit fixed costs are $4. The Park Avenue location wants to purchase 4,000 t-shirts from the Bookstore for $18.50 per t-shirt. The Bookstore can save $1.50 per t-shirt in variable costs if products are transferred internally. Assuming the Bookstore is already operating at full capacity, should the bookstore accept the proposed transfer price of $18.50? Why or why not?