Differential Analysis for Machine Replacement Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $200,000, the accumulated depreciation is $50,000, its remaining useful life is 6 years, and its residual value is negligible. On October 1 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $500,000. The automatic machine has an estimated useful life of 6 years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on present and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses Present Proposed Operations Operations $400,000 $400,000 $120,000 $120,000 90,000 9,000 26,000 1,000 4,000 50,000 50,000 $270,000 $200,000 - dated October 1 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Prepare the
Differential Analysis for Machine Replacement Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $200,000, the accumulated depreciation is $50,000, its remaining useful life is 6 years, and its residual value is negligible. On October 1 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $500,000. The automatic machine has an estimated useful life of 6 years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on present and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses Present Proposed Operations Operations $400,000 $400,000 $120,000 $120,000 90,000 9,000 26,000 1,000 4,000 50,000 50,000 $270,000 $200,000 - dated October 1 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Prepare the
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 10E: Differential analysis for machine replacement Boyer Digital Components Company assembles circuit...
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