Answer:
Company A
a. Differential Analysis dated May 29
Alternative 1 Alternative 2
Opportunity cost $250,000 $550,000
Variable production costs 580,000 192,000
Total cost $830,000 $742,000
b. Sunk cost in this situation is: $225,000 ($400,000 - $175,000) cost of the old machine.
Explanation:
Company A's relevant cost for the old machine is the opportunity cost that it will lose if it continues with Alternative 1 or continued use of the old machine and the additional cost for the new machine for Alternative 2. Also relevant is the variable production costs that would be incurred if the old or new machine is used.
Company A's sunk cost is the cost of the old machine minus accumulated depreciation. Sunk cost is not relevant for decision making under differential analysis.
Company A's differential analysis is a managerial tool that is used to differentiate one decision alternative from another. In this analysis, only relevant costs are considered. A relevant cost in this case is cost that its inclusion or elimination makes a difference in the decision outcome.
The amount of loss that should be recognized is the <u>minimum amount </u><u>of the </u><u>range. </u>
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<h3>Recording a Contingent liability </h3>
- It should only be recorded if the loss is probable and the amount to be incurred as liability can be reasonably estimated.
- If neither of the above are possible, the loss would be recorded as a footnote.
US GAAP rules state however that if the loss is probable and the amount is in a range, the amount to be recorded as a contingent liability should be the minimum of the range.
In conclusion, they should recognize the minimum amount.
Find out more on contingent liabilities at brainly.com/question/17371330.
D. Because he is listening to her fully and making sure he fully understands what she is asking
Answer:
$80,809.09
Explanation:
Present value of the cash flows = ∑(Cash flow × Present value factor)
Present value factor = (1 + r)⁻ⁿ
Here,
r is the discount rate = 15.25% = 0.1525
n is the year of cash flow
thus,
Year n Cash flow PVF Present value
Year 1 1 $48,000 0.86768 $41,648.59
Year 2 2 $39,000 0.75287 $29,361.80
Year 3 3 $15,000 0.65325 $9,798.70
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Present value of the project = $41,648.59 + $29,361.80 + $9,798.70
= $80,809.09