2C2D SUNSHINE CORPORATION IS CONSIDERING THE PURCHASE OF A NEW MACHIN...

245.

CSO: 2C2d

LOS: 2C2d

Sunshine Corporation is considering the purchase of a new machine for $800,000. The

machine is capable of producing 1.6 million units of product over its useful life. The

manufacturer’s engineering specifications state that the machine-related cost of

producing each unit of product should be $.50. Sunshine’s total anticipated demand over

the asset’s useful life is 1.2 million units. The average cost of materials and labor for

each unit is $.40. In considering whether to buy the new machine, would you

recommend that Sunshine use the manufacturer’s engineering specification of machine-

related unit production cost?

a.

No, the machine-related cost of producing each unit is $2.00.

b.

No, the machine-related cost of producing each unit is $.67.

c.

No, the machine-related cost of producing each unit is $.90.

d.

Yes, the machine-related cost of producing each unit is $.50.