Differential Analysis for a Lease-or-Sell Decision Rhombus Construction Company is considering selling excess machinery with a book value of $125,000 (original cost of $340,000 less accumulated depreciation of $215,000) for $102,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $125,000 for 5 years, after which it is expected to have no residual value. During the period of the lease, Rhombus Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $36,500. a. Prepare a differential analysis, dated May 25 to determine whether Rhombus should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery Sell Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Profit (loss) b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The net from selling is

Differential Analysis for a Lease-or-Sell Decision Rhombus Construction Company is considering selling excess machinery with a book value of $125,000 (original cost of $340,000 less accumulated depreciation of $215,000) for $102,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $125,000 for 5 years, after which it is expected to have no residual value. During the period of the lease, Rhombus Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $36,500. a. Prepare a differential analysis, dated May 25 to determine whether Rhombus should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery Sell Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Profit (loss) b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. The net from selling is

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 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...

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1. Differential Analysis for a Lease-or-Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $279,300 (original cost of $399,200 less accumulated depreciation of $119,900) for $276,600, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $283,600 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $25,100. 2. Differential Analysis for a Discontinued Product A condensed income statement by product line for Crown Beverage Inc. indicated the following for King Cola for the past year: Sales $234,500 Cost of goods sold 112,000 Gross profit $122,500 Operating expenses 143,000 Loss from operations $(20,500) It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 18% of the…
Differential Analysis for a Lease-or-Sell Decision Rhombus Construction Company is considering selling excess machinery with a book value of $125,000 (original cost of $340,000 less accumulated depreciation of $215,000) for $102,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $125,000 for 5 years, after which it is expected to have no residual value. During the period of the lease, Rhombus Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $36,500. a. Prepare a differential analysis, dated May 25 to determine whether Rhombus should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt.1) or Sell Machinery (Alt. 2) May 25 Lease Machinery Sell Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative…
Differential Analysis for a Lease-or-Sell Decision Rhombus Construction Company is considering selling excess machinery with a book value of $125,000 (original cost of $340,000 less accumulated depreciation of $215,000) for $102,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $125,000 for 5 years, after which it is expected to have no residual value. During the period of the lease, Rhombus Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be $36,500. Question Content Area a. Prepare a differential analysis, dated May 25 to determine whether Rhombus should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Differential Analysis for a Lease-or-Sell Decision Sure-Bilt Construction Company is considering selling excess machinery with a book value of $283,000 (original cost of $401,300 less accumulated depreciation of $118,300) for $276,900, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $285,900 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,300. a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Differential Effect on Income (Alternative 2) Lease Machinery Sell Machinery (Alternative 1) (Alternative 2)…
Differential Analysis for a Lease-or-Sell Decision Sure-Bilt Construction Company is considering selling excess machinery with a book value of $281,400 (original cost of $400,900 less accumulated depreciation of $119,500) for $275,200, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $286,100 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,400. a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery(Alternative 1) Sell Machinery(Alternative 2) Differential Effects(Alternative…
Differential Analysis for a Lease-or-Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $282,000 (original cost of $400,300 less accumulated depreciation of $118,300) for $277,000, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $284,500 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,700. a. Prepare a differential analysis, dated May 25 to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Lease Machinery Sell Machinery Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Costs Profit…
Differential Analysis for a Lease-or-Sell Decision Inman Construction Company is considering selling excess machinery with a book value of $284,000 (original cost of $402,000 less accumulated depreciation of $118,000) for $275,000, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $283,900 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,000. Question Content Area a. Prepare a differential analysis, dated May 25 to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisLease Machinery (Alt. 1) or Sell Machinery (Alt. 2)May 25 Lease Machinery(Alternative 1) Sell Machinery(Alternative 2) Differential Effecton…
Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,000. The freight and installation costs for the equipment are $620. If purchased, annual repairs and maintenance are estimated to be $420 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,380 per year for four years, with no additional costs. Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment March 15 Lease Buy Differential Equipment (Alternative 1) (Alternative 2) (Alternative 2)…
Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,040. The freight and installation costs for the equipment are $660. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,480 per year for four years, with no additional costs. Question Content Area Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a “lease or buy” decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential AnalysisLease (Alt. 1) or Buy (Alt. 2) EquipmentMarch 15 LeaseEquipment(Alternative 1) BuyEquipment(Alternative…
Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,220. The freight and installation costs for the equipment are $650. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,540 per year for four years, with no additional costs. Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment March 15 Costs: Purchase price Freight and installation Repair and maintenance (4 years) Lease…
Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,200. The freight and installation costs for the equipment are $630. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,480 per year for four years, with no additional costs. Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential Analysis Lease (Alt. 1) or Buy (Alt. 2) Equipment March 15 Buy Equipment (Alternative 1) (Alternative 2) (Alternative 2) Lease Differential…
Differential Analysis for a Lease-or-buy Decision Moffett Industries is considering new equipment. The equipment can be purchased from an overseas supplier for $3,120. The freight and installation costs for the equipment are $610. If purchased, annual repairs and maintenance are estimated to be $390 per year over the 4-year useful life of the equipment. Alternatively, Moffett Industries can lease the equipment from a domestic supplier for $1,360 per year for 4 years, with no additional costs. Question Content Area a. Prepare a differential analysis dated February 12 to determine whether Moffett Industries should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a “lease or buy” decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential AnalysisLease (Alt. 1) or Buy (Alt. 2) EquipmentFebruary 12 Line Item Description LeaseEquipment(Alternative 1)…