MANAGERIAL ACCT.-WILEYPLUS BLKBRD PKG
7th Edition
ISBN: 9781118869765
Author: Weygandt
Publisher: WILEY
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Chapter 7, Problem 7.14E
Use incremental analysis for retaining or replacing equipment decision.
(LO 5), AN
Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
| Current Machine | New Machine | |
| Original purchase cost | $15,000 | $25,000 |
| $ 6,000 | — | |
| Estimated annual operating costs | $25,000 | $20,000 |
| Remaining useful life | 5 years | 5 years |
If sold now. the current machine would have a salvage value of $6.000. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.
Instructions
Should the current machine be replaced?
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Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
Current Machine
New Machine
Original purchase cost
$15,000
$25,200
Accumulated depreciation
$5,900
_
Estimated annual operating costs
$25,000
$19,500
Remaining useful life
5 years
5 years
If sold now, the current machine would have a salvage value of $8,100. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.Prepare an incremental analysis to determine whether the current machine should be replaced.
RetainMachine
ReplaceMachine
Net IncomeIncrease(Decrease)…
Blossom Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
Current Machine
New Machine
Original purchase cost
$14,500
$24,500
Accumulated depreciation
$5,000
_
Estimated annual operating costs
$24,500
$19,500
Remaining useful life
5 years
5 years
If sold now, the current machine would have a salvage value of $9,500. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.Prepare an incremental analysis to determine whether the current machine should be replaced. (In the first two columns, enter costs and expenses as positive…
Johnson Enterprises uses a computer to handle its sales invoicesLately, business has been so good that it takes an extra 3 hours per night, plus every third Saturdayto keep up with the volume of sales invoicesManagement is considering updating its computer with a faster model that would eliminate all of the overtime processing . Current Machine New Machine Original purchase cost $14,900$ 25,200 Accumulated depreciation $6,600 Estimated annual operating costs $ 24,600 $19,600 Remaining useful life years 5 years sold now , the current machine would have a salvage value of $ 10,200 operated for the remainder of its useful life, the current machine would have zero salvage value . The new machine is expected to have zero salvage value
Chapter 7 Solutions
MANAGERIAL ACCT.-WILEYPLUS BLKBRD PKG
Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2QCh. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q
Ch. 7 - Your roommate. Gale Dunham, is confused about sunk...Ch. 7 - Prob. 12QCh. 7 - The steps in managements decision-making process...Ch. 7 - Determine incremental changes. (LO 1), AP Bogart...Ch. 7 - At Bargain Electronics, it costs 30 per unit (20...Ch. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Prob. 7.6BECh. 7 - Prob. 7.7BECh. 7 - Lisah, Inc., manufactures golf clubs in three...Ch. 7 - Nathan T Corporation is comparing two different...Ch. 7 - Prob. 7.2DICh. 7 - Wilma Company must decide whether to make or buy...Ch. 7 - Prob. 7.4DICh. 7 - Prob. 7.5DICh. 7 - Prob. 7.6DICh. 7 - As a study aid. your classmate Pascal Adams has...Ch. 7 - Use incremental analysis for special-order...Ch. 7 - Moonbeam Company manufactures toasters. For the...Ch. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Use incremental analysis for make-or-buy decision....Ch. 7 - Prob. 7.7ECh. 7 - Prepare incremental analysis concerning...Ch. 7 - Anna Garden recently opened her own basketweaving...Ch. 7 - Stahl Inc. produces three separate products from a...Ch. 7 - Kirk Minerals processes materials extracted from...Ch. 7 - Prob. 7.12ECh. 7 - On January 2, 2016, Twilight Hospital purchased a...Ch. 7 - Use incremental analysis for retaining or...Ch. 7 - Veronica Mars, a recent graduate of Bells...Ch. 7 - Cawley Company makes three models of lasers....Ch. 7 - Tharp Company operates a small factory in which it...Ch. 7 - Identify relevant costs for different decisions....Ch. 7 - ThreePoint Sports Inc. manufactures basketballs...Ch. 7 - Use incremental analysis related to make or buy....Ch. 7 - Prob. 7.3APCh. 7 - Compute gain or loss, and determine if equipment...Ch. 7 - Brislin Company has four operating divisions....Ch. 7 - CURRENT DESIGNS Current Designs faces a number of...Ch. 7 - Decision-Making Across the Organization Aurora...Ch. 7 - MiniTek manufactures private-label small...Ch. 7 - Prob. 7.3BYPCh. 7 - Communication Activity Hank Jewell is a production...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Considering Your Costs and Benefits School costs...
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