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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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Michelle is attending a university where tuition for one year costs $17,300. She has a scholarship worth $5,000 per year. She ea
Dmitry_Shevchenko [17]

Answer:

$41,400

Explanation:

Tuition will increase by $500 each year

Year 1 tuition = $17,300

Year 2 tuition = $17,800

Year 3 tuition = $18,300

Year 4 tuition = $18,800

Total = $72,200

Scholarship per year = $5000

Total scholarship for 4 years = 4 * $5000

= $20,000

Earnings per year = $2,700

Total earnings for four years = 4 * $2,700

= $10,800

She plans to take out a loan to cover the remaining tuition costs

Loan = Total tuition - (Total scholarship for 4 years + Total earnings for four years)

= $72,200 - ( $20,000 + $10,800)

= 72,200 - (30,800)

= 72,200 - 30,800

= 41,400

Loan = $41,400

Michelle need to borrow $41,400

6 0
3 years ago
When there are differences between the cash balance per bank and the cash balance per books, this is due to:____.
QveST [7]

When there are differences between the cash balance per bank and the cash balance per book, this is due to the Bank reconciliation statement.

The key difference between cash book balance and bank statement balance is that cash book balance shows the cash balance recorded in a company's cash book while bank statement balance is the cash balance recorded by the bank in its bank records. is.

Such fees and charges are charged to the savings cash balance book, but no entry is made in the cash book unless the company receives the savings book from the bank and records these entries. This creates a difference between the two balances.

Learn more about cash balance at

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6 0
2 years ago
Recognizing oneself as part of a whole and working toward a
Lubov Fominskaja [6]

Answer:

555

Explanation:

4 0
3 years ago
A company that is unwilling to give up control of the business is in need of additional capital. Would issuing additional stock
svetlana [45]

Answer:

Issuing bonds will be the better option for this company. Mainly because they do not like to give up the control of the company or to change its equity structure.

When the bonds are issued, the company gets the money from the investors and has to pay an agreed amount of interest periodically until maturity of the bond, where the company will have to pay the face value of the bonds.

Explanation:

8 0
3 years ago
On December 31, 2017, Ball Company leased a machine from Cook for a 10-year period, expiring December 30, 2027. Annual payments
puteri [66]

Answer:

Explanation:

A capital lease is a lease arrangement in which the lessor agrees to transfer the ownership of an asset to the lessee at the completion of the lease period. During the leasing contract , the lease is treated like an asset in the company's balance sheet

Lease liability at inception =                             676,000

Annual payment  made on December 2017 =(100,000)

Balance lease liability on 2017                        = 576,000

Lease liability on December 2018

Balance on 2017                                                =576,000

Factor in 10% discount on lease payment

100,000 - (576,000*10%)= 100,000-57,600 =   (42,400)

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The current liability portion =

Factoring in the 10% discount =

100,000 - (533,600*10%) = 100,000 - 53,360 =  46,640

7 0
3 years ago
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