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Valentin [98]
3 years ago
6

A company is considering replacing an old piece of machinery, which cost $105,000 and has $55,000 of accumulated depreciation to

date, with a new machine that has a purchase price of $83,000. The old machine could be sold for $56,300. The annual variable production costs associated with the old machine are estimated to be $8,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $5,000 per year for eight years.
a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.
b. What is the sunk cost in this situation?
Business
1 answer:
asambeis [7]3 years ago
7 0

Answer:

Replacing the old machine would produce a net saving of $1,300

The sunk cost in this situation is the purchase cost (i.e $105,000) of the old machine.

Explanation:

<em>Differential Analysis</em>

Purchase cost of the new machine                                 (83,000)

Savings from annual variable cost(8500×8)                   68,000

Variable cost of running the new machine (5,000×8)   (40,000)

Scrap value of the old machine                                    <u>    56,300 </u>  

Differential savings                                                       <u>      1,300   </u>

Replacing the old machine would produce a net saving of $1,300

The sunk cost in this situation is the purchase cost (i.e $105,000) of the old machine. It is a past cost incurred as a result old decision.

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Answer:

The difference might relate to depreciation, loss on sale of fixed assets, or change in working capital.

Explanation:

The net cash flow from operating activities is calculated after adding and deducting certain items and adjustments to net income to get operating cash flow.

First of all, the gains or losses from sale of fixed assets are adjusted, losses are added back and gains are deducted, to get income from operations.

All the non cash transactions that is unrealized gains or losses are eliminated.

Depreciation being non cash is added back.

All the changes in working capital is adjusted.

Increase in value of current assets are deducted, decrease in value of current assets are added, increase in current liability is added and decrease in current liabilities is deducted.

Thus, after all these adjustments the cash flow from operating activities is calculated.

In the given instance also, the difference might relate to depreciation, loss on sale of fixed assets, or change in working capital.

3 0
3 years ago
Genent​ Industries, Inc.​ (GII), developed standard costs for direct material and direct labor. In​ 2017, GII estimated the foll
Alex_Xolod [135]

Answer:

The quantity variance = -900 unfavorable

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6 0
3 years ago
Echo Corporation uses a job-order costing system and applies overhead to jobs using a predetermined overhead rate. During the ye
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Answer:

Actual overhead= $153,400

Explanation:

Giving the following information:

During the year the company's Finished Goods inventory account was debited for $360,000 and credited for $338,800. The ending balance in the Finished Goods inventory account was $36,600.

At the end of the year:

Manufacturing overhead was overapplied by $15,900.

If the applied manufacturing overhead was $169,300.

Because the manufacturing overhead was overapplied, we need to subtract from the applied overhead to determine the actual overhead.

Actual overhead= applied overhead - overapplied overhead

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3 years ago
Which of the following accurately describes the effect target costing has on the manufacturing design function? Select one: A. T
UkoKoshka [18]

Answer:

B. Target costing forces design engineers to explicitly consider the costs of manufacturing and other aspects of business that traditionally fall outside the engineering department

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Target costing needs the design engineers to be active in meeting their customers projection, but it must be inside the target cost requirements. Engineers can not afford to just have their attention on the function and form of design, they must also observe cost under Target costing.

5 0
3 years ago
you have to wait until it says i posted it 1 minute ago if answer before u will be elminated 2 more to go
Blizzard [7]

Answer:

GG

Explanation:

GG

7 0
3 years ago
Read 2 more answers
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