Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
26th Edition
ISBN: 9781305392373
Author: Carl Warren, Jim Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 25, Problem 25.4APE
To determine
Differential Analysis: Differential 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.
To Prepare: The differential analysis to decide whether to continue with the old machine or to replace it.
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Replace Equipment
A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for
$214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new
machine would reduce annual direct labor costs from $50,400 to $40,300.
a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine
(Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
Continue (Alt. 1) or Replace (Alt. 2) Old Machine
June 2
Continue
with Old
Line Item Description
Machine
Replace
Old
Machine
Differential
Effects
(Alternative 2)
(Alternative 1) (Alternative 2)
Proceeds from sale of old machine $
Revenues:
Costs:
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Direct labor (6 years)
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A
St
St
A
B
Replace Equipment
A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for
$214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new
machine would reduce annual direct labor costs from $50,400 to $40,300.
a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine
(Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
Continue (Alt. 1) or Replace (Alt. 2) Old Machine
Line Item Description
June 2
Continue
with Old
Machine
Replace
Old
Differential
Machine
Effects
(Alternative 2)
(Alternative 1) (Alternative 2)
Revenues:
Proceeds from sale of old machine
0.00
$ 214,100
214,100
Costs:
Purchase price
Direct labor (6 years)
Profit (loss)
$
0.00
-283,500
-283,500
302,400
241,800
60,600
-302,400
St
0 X
B
Replace Equipment
A machine with a book value of $251,000 has an estimated six-year life. A proposal is offered to sell the old machine for $216,200 and replace it with a new
machine at a cost of $283,00o. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from
$50,000 to $40,000.
Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an
amount is zero, enter "O". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
October 3
Differential Effect
on Income
(Alternative 2)
Continue with
Old Machine
(Alternative 1) (Alternative 2)
Replace Old
Machine
Revenues:
Proceeds from sale of old machine
Costs:
Purchase price
Direct labor (6 years)
$
Continue with the old machine
Replace the old machine
with the old…
Chapter 25 Solutions
Working Papers, Chapters 1-17 for Warren/Reeve/Duchac's Accounting, 26th and Financial Accounting, 14th
Ch. 25 - Explain the meaning of (a) differential revenue,...Ch. 25 - A company could sell a building for 250,000 or...Ch. 25 - A chemical company has commodity-grade and...Ch. 25 - A company accepts incremental business at a...Ch. 25 - A company fabricates a component at a cost of...Ch. 25 - Prob. 6DQCh. 25 - In the long run, the normal selling price must be...Ch. 25 - Although the cost-plus approach to product pricing...Ch. 25 - How does the target cost concept differ from...Ch. 25 - Prob. 10DQ
Ch. 25 - Under what conditions might a company use...Ch. 25 - Prob. 25.1APECh. 25 - Lease or sell Timberlake Company owns equipment...Ch. 25 - Prob. 25.2APECh. 25 - Discontinue a segment Product B has revenue of...Ch. 25 - Prob. 25.3APECh. 25 - Make or buy A company manufactures various sized...Ch. 25 - Prob. 25.4APECh. 25 - Replace equipment A machine with a book value of...Ch. 25 - Prob. 25.5APECh. 25 - Process or sell Product D is produced for 24 per...Ch. 25 - Prob. 25.6APECh. 25 - Prob. 25.6BPECh. 25 - Product cost markup percentage Magna Lighting Inc....Ch. 25 - Product cost markup percentage Green Thumb Garden...Ch. 25 - Bottleneck profit Product A has a unit...Ch. 25 - Prob. 25.8BPECh. 25 - Activity-based costing Mainline Marine Company has...Ch. 25 - Activity-based costing Casual Cuts Inc. has total...Ch. 25 - Differential analysis for a lease or sell decision...Ch. 25 - Prob. 25.2EXCh. 25 - Differential analysis for a discontinued product A...Ch. 25 - Differential analysis for a discontinued product...Ch. 25 - Segment analysis for a service company Charles...Ch. 25 - Prob. 25.6EXCh. 25 - Make-or -buy decision Jupiter Computer Company has...Ch. 25 - Make-or-buy decision for a service company The...Ch. 25 - Machine replacement decision A company is...Ch. 25 - Differential analysis for machine replacement Kim...Ch. 25 - Prob. 25.11EXCh. 25 - Prob. 25.12EXCh. 25 - Decision on accepting additional business...Ch. 25 - Accepting business at a special price Portable...Ch. 25 - Prob. 25.15EXCh. 25 - Accepting business at a special price for a...Ch. 25 - Product cost concept of product pricing La Femme...Ch. 25 - Product cost concept of product costing Smart...Ch. 25 - Target costing Toyota Motor Corporation uses...Ch. 25 - Target costing Instant Image Inc. manufactures...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Product decisions under bottlenecked operations...Ch. 25 - Activity-based costing CardioTrainer Equipment...Ch. 25 - Activity-based costing Zeus Industries...Ch. 25 - Activity rates and product costs using...Ch. 25 - Total cost concept of product pricing Based on the...Ch. 25 - Variable cost concept of product pricing Based on...Ch. 25 - Differential analysis involving opportunity costs...Ch. 25 - Differential analysis for machine replacement...Ch. 25 - Differential analysis for sales promotion proposal...Ch. 25 - Prob. 25.4APRCh. 25 - Prob. 25.5APRCh. 25 - Prob. 25.6APRCh. 25 - Activity-based costing Pure Cane Sugar Company...Ch. 25 - Prob. 25.1BPRCh. 25 - Differential analysis for machine replacement...Ch. 25 - Differential analysis for sales promotion proposal...Ch. 25 - Differential analysis for further processing The...Ch. 25 - Prob. 25.5BPRCh. 25 - Product pricing and profit analysis with...Ch. 25 - Activity-based costing Southeastern Paper Company...Ch. 25 - Ethics in Action Aaron McKinney is a cost...Ch. 25 - Decision on accepting additional business A...Ch. 25 - Accept business at a special price for a service...Ch. 25 - Communication The following conversation took...Ch. 25 - Identifying product cost distortion Peachtree...
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