(3) In 2020, Taipei believes that it will only be able to sell 2,900 units at the price calculated in requirement (1). Managers have identified $125,000 in fixed cost that can be eliminated. If Taipei wants to maintain at an 8% markup on full cost, what is the target variable cost per unit? (10%)

5. AB Company is considering replacement of its old machine with a new, more cost-saving one. Information related to the old and new machines follows: | Original cost---old machine | $60,000 | | --- | --- | | Book value---old machine | $50,000 | | Current market value---old machine | $42,000 | | Annual operating cost---old machine | $14,000 | | Purchase price---new machine | $75,000 | | Installation cost---new machine | $2,000 | | Annual operating cost---new machine | $6,000 | The old machine had been purchased a year ago. AB estimates that either machine has a remaining useful life of 5 years. At the end of 5 years, either machine would have a salvage value of zero. Ignore the effect of income taxes and the time value of money. Required: (1) Should AB purchase the new machine? Show your calculations. (10%)

(3) In 2020, Taipei believes that it will only be able to sell 2,900 units at the price calculated in requirement (1). Managers have identified $125,000 in fixed cost that can be eliminated. If Taipei wants to maintain at an 8% markup on full cost, what is the target variable cost per unit? (10%)

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