A commercial oven with a book value of $56,160 has an estimated remaining five-year life. A proposal is offered to sell the oven for $17,550 and replace it with a new oven costing $100,320. The new machine has a five-year life with no residual value. The new machine would reduce annual maintenance costs by $19,290. Provide a differential analysis on the proposal to replace the commercial oven. Annual maintenance cost reduction $fill in the blank 1 Number of years applicable fill in the blank 2 Total differential decrease in cost $fill in the blank 3 Proceeds from sale of equipment fill in the blank 4 $fill in the blank 5 Cost of new equipment fill in the blank 6 Net differential decrease in cost from replacing equipment $fill in the blank 7
A commercial oven with a book value of $56,160 has an estimated remaining five-year life. A proposal is offered to sell the oven for $17,550 and replace it with a new oven costing $100,320. The new machine has a five-year life with no residual value. The new machine would reduce annual maintenance costs by $19,290. Provide a differential analysis on the proposal to replace the commercial oven. Annual maintenance cost reduction $fill in the blank 1 Number of years applicable fill in the blank 2 Total differential decrease in cost $fill in the blank 3 Proceeds from sale of equipment fill in the blank 4 $fill in the blank 5 Cost of new equipment fill in the blank 6 Net differential decrease in cost from replacing equipment $fill in the blank 7
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A commercial oven with a book value of $56,160 has an estimated remaining five-year life. A proposal is offered to sell the oven for $17,550 and replace it with a new oven costing $100,320. The new machine has a five-year life with no residual value. The new machine would reduce annual maintenance costs by $19,290.
Provide a differential analysis on the proposal to replace the commercial oven.
| Annual maintenance cost reduction | $fill in the blank 1 | |
| Number of years applicable | fill in the blank 2 | |
| Total differential decrease in cost | $fill in the blank 3 | |
| Proceeds from sale of equipment | fill in the blank 4 | $fill in the blank 5 |
| Cost of new equipment | fill in the blank 6 | |
| Net differential decrease in cost from replacing equipment | $fill in the blank 7 |
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