Question

caseternative 1) or sell (Alternative 2) the machine EE 9-1 p 369 PE 9-1B Lease or sell OBJ. 1 mpany owns equipment with a cost of $165,000 and accumulated deprecia- hat can be sold for $82,000, less a 6% sales commission. Alternatively, the can be leased by Timberlake Company for five years for a total of $84,600, at the end of which there is no residual value. In addition, the repair, insurance, and property expense that would be incurred by Timberlake Company on the equipment would total s7,950 over the five years. Prepare a differential analysis on March 23 as to whether Timberlake Company should lease (Alternative 1) or sell (Alternative 2) the equipment Timberlake Co tion of $60,000 t equipment tax EE9-2 p. 371 PE 9-2A Product TS-20 has revenue of $102,000, variable cost of goods sold of $52,500, variable selling expenses of $21,500, and fixed costs of $35,000, creating a loss from operations of $7,000. Prepare a differential analysis as of September 12 to determine if Product TS-20 should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision Discontinue a segment OBJ. 1 OBJ. 1 Product B has revenue of $39,500, variable cost of goods sold of $25,500, variable selling expenses of $16,500, and fixed costs of $15,000, creating a loss from operations of $17,500 Prepare a differential analysis as of May 9 to determine if Product B should be continued ative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by EE 9-2 p.371 PE 9-2B Discontinue a segment the decision. OBJ.1 EE9-3 p.372 PE 9-3A Make or buy own bresad for a cost of s15 per init too source for $110 per unit, plus $15 per, unit for delivery. Prepare a differential decision an outside a differential analysis ative 1) or buy fixed costs of $43 per unit. A proposal is offered to purchase bread from dated August 16 to determine whether the company should make (Alterr (Alternative 2) the bread, assuming fixed costs are unaffected by the

Answer 1

Req 9-1
Differential Analysis:
			Lease	Sell	Differential
					Effect
Sales revenue			0	82000	82000
Commission (82000*6%)			0	-4920	-4920
Lease rentals			84600	0	-84600
Repairs expense			-7950	0	7950
Net Income			76650	77080	430
Decision: Asset must be sold
Req 9-2A
Differential Analysis
			Continued	Discontinued	Differential
					Effect
Revenue			102000	0	-102000
Less: Variable cost			-52500	0	52500
Less: Vriable Selling expenses			-21500	0	21500
Less: Fixed cost			-35000	-35000	0
Net income /(Loss)			-7000	-35000	-28000
Decision: Continue the Product
Req 9-2B
Differential Analysis:
			Continued	Discontinued	Differential
					Effect
Revenue			39500	0	-39500
Less: Variable cost			-25500	0	25500
Less: Vriable Selling expenses			-16500	0	16500
Less: Fixed cost			-15000	-15000	0
Net income /(Loss)			-17500	-15000	2500
Decision: Discontinue the Product
Req 9-3A
Differential Analysis:
			Make	Buy	Differential
					effect
Variable cost of manufacture			122	0	122
	(165-43)
Variable cost of Purchase			0	110	-110
variable cost of Delivery			0	15	-15
Differential income			122	125	-3
Decision: Make the bread
Note: Fixed cost of manufacture of $ 43 shall not be taken in to account as it is irrelevant cost.