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2 years ago

Differential Analysis for a Lease or Buy Decision

Business

1 answer:

il63 [147K]2 years ago

4 0

Answer:

Lease Equipment $150,000

BUY EQUIPMENT$134,700

Differential Effects-$15,300

The company should choose BUY EQUIPMENT which is Alternative 2

Explanation:

Preparation of the differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment

Differential Analysis

Lease (Alt. 1) or Buy (Alt. 2) Equipment

March 15

Lease Equipment (Alternative 1); Buy Equipment

(Alternative 2); Differential Effects (Alternative 2)

Costs:

Purchase price $0 $120,000 $120,000

Freight and installation $0 $1,500 $1,500

Repair and maintenance (6 years) $0 $13,200.$13,200

($2,200*6=$13,200)

Lease (6 years) $150,000 $0 -$150,000

($25,000*6)

Total costs $150,000 $134,700 -$15,300

Based on the above calculation the company should choose BUY EQUIPMENT which is Alternative 2

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Jacoby Company received an offer from an exporter for 25,400 units of product at $18 per unit. The acceptance of the offer will

OlgaM077 [116]

Answer:

Differential income from the special order= $127,000

Explanation:

A company should accept a special order where the order generates additional contribution. i.e where the special order sales exceeds all relevant cost.

The relevant cost for decision to accept the special order are

I Incremental Revenue from the special order

2. incremental variable cost

Contribution per unit = 18-13=5

Total contribution from special order = contribution per unit × units

= 5× 25,400=$127,000

Differential income from the special order= $127,000

Note that whether or not the special order is accepted the fixed manufacturing and fixed operating expenses of would be incurred either way. Therefore , they are not relevant for the decision

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2 years ago

A firm is deciding whether or not to complete the building of a new office.

kirill115 [55]

The relevant cost of building an office building is $9 million.

The calculation of the relevant cost of building an office building is as follows:

= Sale value of partially completed building and land + additional labor & material required

= $4 million + $5 million

= $9 million

Therefore we can conclude that the relevant cost of building an office building is $9 million.

Learn more about the building here: brainly.com/question/24285028

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2 years ago

This technique is an iterative process that identifies and defines the work to be completely accomplished in the near term, and

kiruha [24]

Answer:

The correct answer is: Rolling wave planning

Explanation:

Rolling Wave Planning refers to the technique or process of project planning or management in waves. This technique involves iterative planning with the progression of the project. It is used in case of a tight or strict schedule that has to be followed.

The planning of the work to be completed in near term, involves setting high level assumptions and milestones.

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3 years ago

Ayayai Inc. had the following balance sheet at December 31, 2019.

Mrrafil [7]

Answer:

(a) Increase in cash = $50,200

(b) Total Assets = Liabilities and Stockholders' Equity = $298,900

Explanation:

Note: There are errors as date and name inconsistency in the requirements in this question. The requirements are therefore correctly stated before answering the question as follows:

(a) Prepare a statement of cash flows for the year 2020 for Ayayai Inc.

(b) Prepare the balance sheet as it would appear as of December 31, 2020.

The explanation of the answer is now provided as follows:

(a) Prepare a statement of cash flows for the year 2020 for Ayayai Inc.

Note: See part (a) of the attached excel file for the statement of cash flows for the year 2020 for Ayayai Inc.

In the attached excel file, we have:

Increase in cash = $50,200

(b) Prepare the balance sheet as it would appear as of December 31, 2020.

Note: See part (b) of the attached excel file for the balance sheet as it would appear as of December 31, 2020.

In the attached excel file, we have:

Total Assets = Liabilities and Stockholders' Equity = $298,900

Download xlsx

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2 years ago

Given your understanding of cash flow, financial statements, ratio analysis and time value of money, provide an example of why t

Alla [95]

Answer:

The best example I can think of that would integrate all of these concepts is when a business is looking to finance some sort of project and they are seeking financing either through the issuance of bonds or a loan from a bank. Some of the concepts would be important to both parties, while others would be more important to one than the other.

Cash Flow

This would be important to both parties. The business, to make sure they have enough cash flow to pay for the financing. And the financiers, for the same reason.

Ratio Analysis

This would be important to both parties for the same reason as above. Especially the "current ratio" (current assets / current liabilities) and the "working capital" ratio (current assets - current liabilities).

Financial Statements

This would be of most importance to the financiers. They would want to see the total picture of a company's financial strength.

Time Value of Money

This would be of most importance to the company itself. They would want to know if the project was worth the total amount they would be paying on the bonds or the loan

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3 years ago