Homework Answers
Solution 1:
| Differential Analysis | |||
| Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) | |||
| 8-Nov | |||
| Particulars | Continue with Old Machine (Alternative 1) | Replace Old Machine (Alternative 2) | Differential Effect on Income (Alternative 2) |
| Revenues | |||
| Proceeds from sale of old machine | $0.00 | $29,835.00 | $29,835.00 |
| Costs | |||
| Purchase price | $0.00 | $119,840.00 | $119,840.00 |
| Annual manufacturing costs (6 yrs.) | $142,260.00 | $41,520.00 | -$100,740.00 |
| Income (Loss) | -$142,260.00 | -$131,525.00 | $10,735.00 |
Solution 2:
Factors to be considered before final decision:
1. What opportunities are available for the use of $90,005 funds that are required to purchase new machine
2. What effect does the federal income tax have on the decision
3. Are there any improvements in quality of work turned out by new machine.
Add Answer to:
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that has been used in its factory for four years. Relevant data
associated with the operations of the old machine and the new
machine, neither of which has any estimated residual value, are as
follows:
Old Machine
Cost of machine, 10-year life
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Annual depreciation (straight-line)
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Annual manufacturing costs, excluding depreciation
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Annual non-manufacturing operating expenses
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Annual revenue
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Current estimated selling price of machine
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Lexigraphic Printing Company is considering replacing a machine
that has been used in its factory for four years. Relevant data
associated with the operations of the old machine and the new
machine, neither of which has any estimated residual value, are as
follows:
Old Machine
Cost of machine, 10-year life
$88,820
Annual depreciation (straight-line)
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Annual manufacturing costs, excluding depreciation
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Annual non-manufacturing operating expenses
6,020
Annual revenue
74,030
Current estimated selling price of machine
29,610
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Purchase price...
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