Brief Exercise 20-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,500 and a remaining useful life of 6 years. It can be sold for $30,600. A new machine is available at a cost of $534,000. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $556,800 to $480,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total Retain Equipment The old factory machine should be 556800 556800 retained + Replace Equipment 480200 534000 -30600 983600 Net Income Increase (Decrease) 76600 -534000 30600 -426800

Brief Exercise 20-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,500 and a remaining useful life of 6 years. It can be sold for $30,600. A new machine is available at a cost of $534,000. This machine will have a 6-year useful life with no salvage value. The new machine brings annual variable manufacturing costs from $556,800 to $480,200. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Variable manufacturing costs New machine cost Sell old machine Total Retain Equipment The old factory machine should be 556800 556800 retained + Replace Equipment 480200 534000 -30600 983600 Net Income Increase (Decrease) 76600 -534000 30600 -426800

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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Janko Wellspring Incorporated has a pump with a book value of $26,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $47,000. Janko can receive $8,200 for trading in the old pump. The old machine has variable manufacturing costs of $27,000 per year. The new pump will reduce variable costs by $11,100 per year over its four-year life. Should the pump be replaced? Multiple Choice No, because the company will be $5,600 worse off in total. Yes, because income will increase by $5.500 per year No, because income wit decrease by $100 per year. Yes, because income will increase by $5.600 in total No, Janko will record a loss of $16,400 r they replace the pump
Selected T - accounts of Moore Company are given below for the just completed year: Raw Materials Debit Credit Balance 1/1 33,000 Credits ? question mark Debits 156,000 Balance 12/31 43,000 Manufacturing Overhead Debit Credit Debits 186,200 Credits ? question mark Work in Process Debit Credit Balance 1/1 38,000 Credits 524,000 Direct materials 108,000 Direct labor 204,000 Overhead 214, 200 Balance 12/31 ? question mark Factory Wages Payable Debit Credit Debits 221,000 Balance 1/1 18,000 Credits 216,000 Balance 12/31 13,000 Finished Goods Debit Credit Balance 1/1 58,000 Credits ? question mark Debits? question mark Balance 12/31 87,000 Cost of Goods Sold Debit Credit Debits? question mark Required: What was the cost of raw materials used in production? How much of the materials in (1) above consisted of indirect materials? How much of the factory labor cost is indirect labor? What was the cost of goods manufactured? What was the unadjusted cost of goods sold? Do not include any…
5. Magnum Electronics Company expects a demand of 20,000 units per year for a special-purpose component at the end of the next six years. Net return (profit) per unit is $4. To produce the component, Magnum must buy a machine costing $250,000 with a life of six years and a salvage value of $40,000 after six years. The company estimates that repair costs will be $20,000 per year during the beginning of Years 2 to 6. If Magnum requires a return of investment of 18%, should it market the component? Can only use BA 2 Plus Calculator
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7
A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative
k Rory Company has an old machine with a book value of $77,000 and a remaining five-year useful life. Rory is considering purchasing a new machine at a price of $106,000. Rory can sell its old machine now for $73,000. The old machine has variable manufacturing costs of $32,000 per year. The new machine will reduce variable manufacturing costs by $12,800 per year over its five-year useful life. (a) Prepare a keep or replace analysis of income effects for the machines. (b) Should the old machine be replaced? Complete this question by entering your answers in the tabs below. Required A Required B Prepare a keep or replace analysis of income effects for the machines. ces Keep or Replace Analysis Keep Revenues Sale of existing machine $ 0 Costs Purchase of new machine Variable manufacturing costs Income (loss) Replace Income Increase (Decrease) if replaced
Lacey Manufacturing is considering replacing one of its machines. You are provided with the following information: Old Machine: Original purchase price $100,000 Est. annual variable costs 225,000 Est. selling price 25,000 Est. remaining useful life 5 years New Machine: Purchase price $250,000 Est. annual variable costs 150,000 Est. residual value 0 Est. useful life 5 years Determine if the company should keep using the old machine or sell it and replace it with the new machine. Show your work to justify your answer
9 Choose the correct answer below.
A cookie factory needs a new cookie machine. They have narrowed their choices to the following machines: a Cost $18000 25000 15000 Annual net savings 1055 2125 1020 IRR 7% 9% 8% Each machine has a 25-year useful life with no salvage value. If the MARR for this factory is 10%, which alternative should be chosen? (Incremental IRR analysis method is required)