Blossom Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 40,000 timers, the company has calculated the following unit costs. Direct fixed costs include supervisory and clerical salaries and equipment depreciation. Direct materials $11
Direct labor 5
Variable manufacturing overhead 2
Direct fixed manufacturing overhead 8(30% salaries, 70% depreciation)
Allocated fixed manufacturing overhead 5
Total unit cost $31
Clifton Clocks has offered to provide the timer units to Blossom at a price of $32 per unit. If Blossom accepts the offer, the current timer unit supervisory and clerical staff will be laid off.
Assume that if Blossom Water accepts Clifton’s offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 80,000 of the new lights each year at a price of $10. Variable costs of the lights are expected to be $7 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make or buy the timer units.

The gilbert instrument corporation is considering replacing the wood steamer it currently uses to shape guitar sides. the steamer has 6 years of remaining life. if kept, the steamer will have depreciaiton expenses of $650 for five years and $325 for the sixthyear. its current book value is $3,575, and it can be sold on an internet auction site for$4,150 at this time. if the old steamer is not replaced, it can be sold for $800 at the endof its useful life. gilbert is considering purchasing the side steamer 3000, a higher-end steamer, whichcosts $12,000 and has an estimated useful life of 6 years with an estimated salvage value of$1,500. this steamer falls into the macrs 5-year class, so the applicable depreciationrates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. the new steamer is fasterand allows for an output expansion, so sales would rise by $2,000 per year; the newmachine's much greater efficiency would reduce operating expenses by $1,900 per year. to support the greater sales, the new machine would require that inventories increase by$2,900, but accounts payable would simultaneously increase by $700. gilbert's marginalfederal-plus-state tax rate is 40%, and its wacc is 15%.a. should it replace the old steamer? b. npv of replace = $2,083.51