Answer:
it is too long but also I like to choice Step 1
Answer:
Company should continue with old machine (Alternative 1)
Explanation:
Preparation of a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)
DIFFERENTIAL ANALYSIS
Continue with old machine(Alternative 1) ; Replace with old machine(Alternative 2); Differential effect on income
REVENUES
Proceeds from sale of machine
$0 $50500 $50500
COSTS
Purchase price $0 -$75000 -$75000
Direct labor -$56000 -$37000 19000
(11200*5 = -56000)
(7400*5 = -37000)
Income (loss) -$56000 -$61500 -$5500
Based on the above differential analysis the Company should continue with OLD MACHINE (Alternative 1)
Answer:
Differences in Operating Incomes Under Absorption Costing and Variable Costing:
The 2020 operating income under absorption costing is greater than the operating income under variable costing because
the ending inventory has carried over some fixed manufacturing costs, making the cost of goods sold less than under variable costing.
Explanation:
The differences in the operating incomes obtained under variable costing and absorption costing are due to the fixed manufacturing costs that are included in the ending inventory and carried forward to the next accounting period while the ending inventory under variable costing does not include any fixed manufacturing costs. Absorption costing is based on full costing system but, variable costing does not include the full costs.
