COST ACCOUNTING
null Edition
ISBN: 9781323927397
Author: Pearson
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 11, Problem 11.21E
Disposal of assets. Answer the following questions.
- 1. A company has an inventory of 1,300 assorted parts for a line of missiles that has been discontinued. The inventory cost is $71,000. The parts can be either (a) remachined at total additional costs of $27,500 and then sold for $31,500 or (b) sold as scrap for $6,000. Which action is more profitable? Show your calculations.
- 2. A truck, costing $102,500 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for $14,000 cash and replaced with a similar truck costing $105,500 or (b) rebuilt for $86,000 and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations.
Expert Solution & Answer
Learn your wayIncludes step-by-step video
schedule02:34
Students have asked these similar questions
A company has an inventory of 1,300 assorted parts for a line of missiles that has been discontinued. The inventory cost is $71,000. The parts can be either (a) remachined at total additional costs of $27,500 and then sold for $31,500 or (b) sold as scrap for $6,000. Which action is more profitable? Show your calculations.
A company has an inventory of 1,000 assorted parts for a line of missiles that has been discontinued. The inventory cost is $80,000.
The parts can be either (a) remachined at total additional costs of $30,000 and then sold for $35,000, or (b) sold as scrap for $2,000. Which action should be take
Disposal of assets.
1. A company has an inventory of 1,300 assorted parts for a line of missiles that has been discontinued. The inventory cost is $71,000. The parts can be either (a) remachined at total additional costs of $27,500 and then sold for $31,500 or (b) sold as scrap for $6,000. Which action is more profitable? Show your calculations.
2. A truck, costing $102,500 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for $14,000 cash and replaced with a similar truck costing $105,500 or (b) rebuilt for $86,000 and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations.
Chapter 11 Solutions
COST ACCOUNTING
Ch. 11 - Prob. 11.1QCh. 11 - Define relevant costs. Why are historical costs...Ch. 11 - All future costs are relevant. Do you agree? Why?Ch. 11 - Distinguish between quantitative and qualitative...Ch. 11 - Describe two potential problems that should be...Ch. 11 - Variable costs are always relevant, and fixed...Ch. 11 - A component part should be purchased whenever the...Ch. 11 - Prob. 11.8QCh. 11 - Managers should always buy inventory in quantities...Ch. 11 - Management should always maximize sales of the...
Ch. 11 - Prob. 11.11QCh. 11 - Cost written off as depreciation on equipment...Ch. 11 - Managers will always choose the alternative that...Ch. 11 - Prob. 11.14QCh. 11 - Prob. 11.15QCh. 11 - Qualitative and quantitative factors. Which of the...Ch. 11 - Special order, opportunity cost. Chade Corp. is...Ch. 11 - Prob. 11.18MCQCh. 11 - Keep or drop a business segment. Lees Corp. is...Ch. 11 - Relevant costs. Ace Cleaning Service is...Ch. 11 - Disposal of assets. Answer the following...Ch. 11 - Relevant and irrelevant costs. Answer the...Ch. 11 - Multiple choice. (CPA) Choose the best answer. 1....Ch. 11 - Special order, activity-based costing. (CMA,...Ch. 11 - Make versus buy, activity-based costing. The...Ch. 11 - Inventory decision, opportunity costs. Best Trim,...Ch. 11 - Relevant costs, contribution margin, product...Ch. 11 - Selection of most profitable product. Body Image,...Ch. 11 - Theory of constraints, throughput margin, relevant...Ch. 11 - Closing and opening stores. Sanchez Corporation...Ch. 11 - Prob. 11.31ECh. 11 - Relevance of equipment costs. Janets Bakery is...Ch. 11 - Equipment upgrade versus replacement. (A. Spero,...Ch. 11 - Special order, short-run pricing. Diamond...Ch. 11 - Short-run pricing, capacity constraints. Fashion...Ch. 11 - International outsourcing. Riverside Clippers Corp...Ch. 11 - Relevant costs, opportunity costs. Gavin Martin,...Ch. 11 - Opportunity costs and relevant costs. Jason Wu...Ch. 11 - Opportunity costs. (H. Schaefer, adapted) The Wild...Ch. 11 - Make or buy, unknown level of volume. (A....Ch. 11 - Make versus buy, activity-based costing,...Ch. 11 - Prob. 11.42PCh. 11 - Product mix, special order. (N. Melumad, adapted)...Ch. 11 - Theory of constraints, throughput margin, and...Ch. 11 - Theory of constraints, contribution margin,...Ch. 11 - Closing down divisions. Ainsley Corporation has...Ch. 11 - Dropping a product line, selling more tours....Ch. 11 - Prob. 11.48PCh. 11 - Dropping a customer, activity-based costing,...Ch. 11 - Equipment replacement decisions and performance...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 an...
Principles of Accounting Volume 1
Loder Company had a good year, and recorded a large gain on the sale of a discontinued business segment. Bates ...
Financial Accounting
Determining Acquisition Cost. Haply, Inc. incurred the following expenditures when acquiring a new assembly mac...
Intermediate Accounting (2nd Edition)
Color Explosion prepares and packages paint products. Color Explosion has two departments: Blending and Packagi...
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
4. JC Manufacturing purchase d inventory for $ 5,300 and al so paid a $260 freight bill. JC Manufacturing retur...
Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
E8-13 Identifying internal controls
Learning Objective 1
Consider each situation separately. Identify the missi...
Horngren's Accounting (11th Edition)
Knowledge Booster
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.Similar questions
- A truck, costing $102,500 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for $14,000 cash and replaced with a similar truck costing $105,500 or (b) rebuilt for $86,000 and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly? Show your calculations.arrow_forwarda company has an inventory of 1100 assorted parts for a line of missiles that has been discontinued. The inventory cost is $78000. The parts can be either (a) remachined at total additional costs of $24500 and then sold for $33000 or (b) sold as scrap for $6500. Which action is more profitable?arrow_forwardDetermining the Cost of an Asset Keystone, Inc., replaced its truck-and-dolley system of moving inventory around its plant with a computer-controlled conveyor system. The costs associated with this equipment replacement were as follows: Purchase price of conveyor system $800,000 Book value of truck-and-dolley system 20,000 Installation cost of new conveyor system 55,000 The truck-and-dolley system was sold for scrap for $40,000. What value should be capitalized to the balance sheet of Keystone, Inc., as the cost basis of the new conveyor system? $Answerarrow_forward
- Assume that a company is choosing between two alternatives—keep an existing machine or replace it with a machine. The costs associated with the two alternatives are summarized as follows: Existing Machine New Machine Purchase cost (new) $ 15,000 $ 26,000 Remaining book value $ 6,000 Overhaul needed now $ 5,000 Annual cash operating costs $ 11,500 $ 7,000 Salvage value (now) $ 2,000 Salvage value (eight years from now) $ 1,000 $ 6,000 If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Based on a net present value analysis with a discount rate of 14%, what is the financial advantage (disadvantage) of replacing the existing machine with a new machine?arrow_forwardAhmed Corporation is considering replacing a machine that is presently used in its production process. The following information is available: Old New Machine Machine Original cost $45,000 $25,000 Remaining useful life in years 5 5 Current age in years 5 0 Book value $25,000 N/A Current disposal value in cash $5,000 N/A Future disposal value in cash (in five years) $0 $0 Annual cash operating costs $ 8,000 $ 6,000 Required: 1) Which of the data provided in the table are relevant to the decision?arrow_forwardA truck, costing $101000 and uninsured, is wrecked its first day in use. It can be either (a) disposed of for $17500 cash and replace with a similar truck costing $103500 or (b) rebuilt for $89500 and thus be brand-new as far as operating characteristics and looks are concerned. Which action is less costly?arrow_forward
- A granary has two options for a conveyor used in the manufacture of grainfor transporting, filling, or emptying. One conveyor can be purchased and installed for $70,000 with $3,000 salvage value after 16 years. The other can be purchased and installed for $110,000 with $4,000 salvage value after 16 years. Operation and maintenance for each is expected to be $18,000 and $14,000 per year, respectively. The granary uses MACRS-GDS depreciation, has a income-tax rate of 25%, and a MARR of 9% after taxes. Use MACRS-GDS(10) alone.arrow_forwardIn a cost center, the manager has responsibility and authority for making decisions that affect a. costs b. investments in assets c. both costs and revenues d. revenues Keating Co. is considering disposing of equipment with a cost of $68,000 and accumulated depreciation of $47,600. Keating Co. can sell the equipment through a broker for $27,000 less 8% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $46,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is a. $11,160 b. $7,812 c. $16,740 d. $13,392 If sales are $828,000, variable costs are 68% of sales, and operating income is $278,000, what is the contribution margin ratio? a. 64% b. 36% c. 68% d. 32%arrow_forwardMonroe Manufacturing owns a warehouse that has been used for storing finished goods for electro-pump products. As the company is phasing out the electro-pump product line, the company is considering modifying the existing structure to use for manufacturing a new product line. Monroe's production engineer feels that the warehouse could be modified to handle one of two new product lines. The cost and revenue data for the two product alternatives arc as follows: Product A Product BInitial cash expenditure:• Warehouse modification $115,000 $189,000• Equipment $250,000 $315,000Annual revenues $215,000 $289,000Annual O&M costs $126,000 $168,000Product life 8 years 8 yearsSalvage value…arrow_forward
- Q5A company has an inventory of 1,250 assorted parts for a line of missiles that has been discontinued. The inventory cost is $72,000. The parts can be either (a) re-machined at total additional costs of $28,000 and then sold for $33,500 or (b) sold as scrap for $3,500. What would be the difference in costs between these two alternatives?arrow_forwardA granary has two options for a conveyor used in the manufacture of grain for transporting, filling, or emptying. One conveyor can be purchased and installed for $95,000 with $4,500 salvage value after 16 years. The other can be purchased and installed for $95,000 with $5,500 salvage value after 16 years. Operation and maintenance for each is expected to be $21,000 and $16,500 per year, respectively. The granary uses MACRS-GDS depreciation, has a marginal tax rate of 40%, and has a MARR of 9% after taxes. Determine which alternative is less costly, based upon comparison of after-tax annual worth. Show the AW values used to make your decision:Conveyor 1:Conveyor 2:arrow_forwardVaughn Manufacturing is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment Purchase price $220500 $367500 Accumulated depreciation 88200 - 0 - Annual operating costs 294000 235200 If the old equipment is replaced now, it can be sold for $58800. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets.For the 5-year period, what is the increase or decrease in net income associated with the new equipment? $88200` $58800 $(14700) $(73500)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
Property, Plant and Equipment (PP&E) - Introduction to PPE; Author: Gleim Accounting;https://www.youtube.com/watch?v=e_Hx-e-h9M4;License: Standard Youtube License