What is the economic life of the challenger?O 3O 1O 4O 2What is your recommendation?O Replace old oven in year 3Replace oven in year 4Replace the old oven now.Do not replace the old oven 88-90: One of the four ovens at a bakery is being considered for replacement. Itssalvage value and maintenance costs are given in the table below for several years. Anew oven costs $80,000 and this price includes a complete guarantee of themaintenance costs for the first two years, and it covers a good proportion of themaintenance costs for years 3 and 4. The salvage value and maintenance costs are alsosummarized in the table.Old OvenNew OvenYearEUACEUAC$14,500.00$13,000.0014,404.8012,762.0014,312.6012,531.50414,439.6012,762.55What is the economic life of the defender?O 2O 3O 4O 11.2.3.

EUAC means Equivalent unit annual cost Given in the question: Year Old Oven New Oven…

Answered: 88-90: One of the four ovens at a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The owners of a new planned unit development have installed a package sewage treatment plant that will be paid for by rates charged to the users. package sewage treatment plant cost new = $1,000,000 life of the plant = 240 months %3D salvage value at EOM 240 = 50 O & M cost = gradient in O & M = $400/month/month $40,000/month %3D periodic overhaul every 10 months (first at EOM 4, last at EOM 234) = $100,000/cach gradient in periodic overhaul = $5,000each/10 months number of customers = 6,000 charge per customer = $16.00/month %3D The owners borrowed money at 1 percent per month interest in order to construct the plant, so while they do not expect to make a big profit, they do want the plant to earm a rate of return of at least 1 percent. Is the rate shown above sufficient to carn 1 percent rate of return? (Ans. At a trial i= 1%, the NAW=+$930/month, so the plant earns more than 1% rate of return.)
The cost of a new machine is $40,000 and the new machine takes $2,000 to install. At the end of its useful life, its salvage value is $5,000. Under the modified accelerated cost recovery system (MACRS), what is the depreciable value of the new machine? a $35,000 b $37,000 c $42,000 d $40,000
Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table: Machine A Machine B Original Cost $15,000 $24,000 Labor per year $2,400 $4,000 Maintenance per year $4,300 $800 Salvage value $2,000 $7,500 He is told to assume that: 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine B= $._____enter your response here
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $246,000 including installation. The company estimates that the equipment will have a residual value of $27,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,800 2 1,900 3 2,000 4 2,000 5 1,800 6 1,500 Problem 7-5A Part 1 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
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Fire company's plant manager is considering whether to buy a new welding robot to replace an old welding robot or overhauling the old welding robot to extend its useful life for 5 more years. The new robot would have a useful life of 5 years. The following information is available: Old welding robot: Original cost- $50,000 Accumulated depreciation- $40,000 Estimated annual operating costs after overhaul- $15,000 Current salvage value- $3,000 Cost of overhaul- $18,000 Salvage value in 10 years- $1,800 New welding robot: Cost- $72,000 Estimated annual operating costs- $8,000 Salvage value at the end of 5 years- $9,000 1. Determine the 5 year cost of overhauling and continuing to use the old robot 2. Determine the 5 year cost of replacing the old robot with the new robot 3. Identify two qualitative aspects management should consider before making their decision.
4 Excelsior Industries is evaluating the purchase of a new manufacturing machine for its product line (referred to as a "project" for the purpose of setting up the questions). The machine has an estimated life of four years. The cost of the machine is $250,000, and the machine will be depreciated using the straight-line method to a residual value of $0. The machine is expected to generate additional sales of 10,000 units in year 1, with sales growing by 8% annually through year four. The selling price per unit will be $120, and the cost of goods sold unit will be $75. per
A company owner has asked his accountant to research the photocopier equipment available from vendors, and to recommend the two best equipment alternatives. The company owner will decide on one piece of equipment to purchase. The fee charged for the accountant’s research was $500. The accountant’s report produced the following information: Photocopier (A) Photocopier (B) Initial cost, including installation $6,500 $ 6,000 Economic life 5 years 5 years Scrap value at end of economic life -0- -0- Initial training cost $ 500 $ 700 Annual maintenance $ 400 $ 300 Annual wage cost $12,500 $12,500 REQUIRED Which photocopier should the company owner choose? Why? The company owner requested your help in preparing the coming year company budget. Please, guide him to the best method and appropriate type from your perspective. Evaluation and Grading: Your answers would be evaluated and graded based on: Coverage…
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $228,000 including installation. The company estimates that the equipment will have a residual value of $24,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours, actual use per year as follows: 1 year 3,000 hours; 2 years 1,700 hours; 3 years, 1,800 hours, 4 years 2,200 hours 5 years 2,000 hours 6 years 1,300 hours. Prepare depreciation schedule for 6 years using the activity based method
Two machines with the following cost estimates are under consideration for a dishwasher assembly process. Using an interest rate of 10% per year, determine which alternative should be selected on the basis of an annual worth analysis.
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In trying to decide whether or not to replace a sorting/baling machine in a solid waste recycling operation, an engineer calculated the annual worthvalues for the in-place machine and a challenger. On the basis of these costs, the defender should be replaced:a. now.b. 1 year from now.c. 2 years from now.d. 3 years from now.

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