Duncan Company owns a machine with a cost of $308,440 and accumulated depreciation of $63,270 that can be sold for $264,500 less a 6% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of $276,490, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Duncan Company on the machine would total $24,440 over the three years. Required:1.Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required.2.Should Duncan Company lease (Alternative 1) or sell (Alternative 2) the machine?Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required. Differential AnalysisLease Machine (Alternative 1) or Sell Machine (Alternative 2)February 211 Lease MachineSell MachineDifferential Effect on Income2 (Alternative 1)(Alternative 2)(Alternative 2)3 4 5 Should Duncan Company lease (Alternative 1) or sell (Alternative 2) the machine?The company is indifferent since the result is the same regardless of which alternative is chosen. Sell the machine Lease the machine

Answered: Prepare a differential analysis on…

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 1BE: Lease or sell Plymouth Company owns equipment with a cost of 600,000 and accumulated depreciation of...

See similar textbooks

Related questions

Question

Duncan Company owns a machine with a cost of $308,440 and accumulated depreciation of $63,270 that can be sold for $264,500 less a 6% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of $276,490, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Duncan Company on the machine would total $24,440 over the three years.

	Required:
1.	Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required.
2.	Should Duncan Company lease (Alternative 1) or sell (Alternative 2) the machine?

Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter “0”. A colon (:) will automatically appear if required.

Differential Analysis

Lease Machine (Alternative 1) or Sell Machine (Alternative 2)

February 21

1	Lease Machine	Sell Machine	Differential Effect on Income
2	(Alternative 1)	(Alternative 2)	(Alternative 2)
3
4
5

Should Duncan Company lease (Alternative 1) or sell (Alternative 2) the machine?

The company is indifferent since the result is the same regardless of which alternative is chosen.

Sell the machine

Lease the machine

Expert Solution

Step 1

Incremental Analysis: Incremental analysis refers to the analysis of differential revenue that could be gained or differential cost that could be incurred from the available alternative options of business.

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.