Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold oven, assuming that the average price for natural gas over the next 10 years will be $0.55 pertherm. (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, e.g.-15,000 or (15,000).) Variable manufacturing costs New oven cost Proceeds from scrapping old oven Retain Oven 93500 0 ° 14 Replace Oven 82500 -240000 10000 i Net Income Increase (Decrease) 11000 -240000 10000 Total $ 93500 $ -312500 $ -219000 Current Designs should not ✓ purchase the new rotomold oven. Current Designs faces a number of important decisions that require incremental analysis. Current Designs is always working to identify ways to increase efficiency while becoming more environmentally conscious. During a recent brainstorming session, one employee suggested to Diane Buswell, controller, that the company should consider replacing the current rotomold oven as a way to realize savings from reduced energy consumption. The oven operates on natural gas, using 17,000 therms of natural gas for an entire year. A new, energy-efficient rotomold oven would operate on 15,000 therms of natural gas for an entire year. After seeking out price quotes from a few suppliers, Diane determined that it would cost approximately $250,000 to purchase a new, energy-efficient rotomold oven. She determines that the expected useful life of the new oven would be 10 years, and it would have no salvage value at the end of its useful life. Current Designs would be able to sell the current oven today for $10,000. Otherwise, its remaining useful life is estimated at 10 years with a zero salvage value.
Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold oven, assuming that the average price for natural gas over the next 10 years will be $0.55 pertherm. (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, e.g.-15,000 or (15,000).) Variable manufacturing costs New oven cost Proceeds from scrapping old oven Retain Oven 93500 0 ° 14 Replace Oven 82500 -240000 10000 i Net Income Increase (Decrease) 11000 -240000 10000 Total $ 93500 $ -312500 $ -219000 Current Designs should not ✓ purchase the new rotomold oven. Current Designs faces a number of important decisions that require incremental analysis. Current Designs is always working to identify ways to increase efficiency while becoming more environmentally conscious. During a recent brainstorming session, one employee suggested to Diane Buswell, controller, that the company should consider replacing the current rotomold oven as a way to realize savings from reduced energy consumption. The oven operates on natural gas, using 17,000 therms of natural gas for an entire year. A new, energy-efficient rotomold oven would operate on 15,000 therms of natural gas for an entire year. After seeking out price quotes from a few suppliers, Diane determined that it would cost approximately $250,000 to purchase a new, energy-efficient rotomold oven. She determines that the expected useful life of the new oven would be 10 years, and it would have no salvage value at the end of its useful life. Current Designs would be able to sell the current oven today for $10,000. Otherwise, its remaining useful life is estimated at 10 years with a zero salvage value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Prepare an incremental analysis to determine if Current Designs should purchase the new rotomold oven, assuming that the
average price for natural gas over the next 10 years will be $0.55 pertherm. (Enter decrease in net income then enter with a negative
sign preceding the number or parenthesis, e.g.-15,000 or (15,000).)
Variable
manufacturing
costs
New oven cost
Proceeds from
scrapping old
oven
Retain
Oven
93500
0
°
14
Replace
Oven
82500
-240000
10000 i
Net Income
Increase
(Decrease)
11000
-240000
10000
Total
$
93500
$
-312500
$
-219000
Current Designs should not
✓ purchase the new rotomold oven.
Transcribed Image Text:Current Designs faces a number of important decisions that require incremental analysis.
Current Designs is always working to identify ways to increase efficiency while becoming more environmentally conscious. During a
recent brainstorming session, one employee suggested to Diane Buswell, controller, that the company should consider replacing the
current rotomold oven as a way to realize savings from reduced energy consumption. The oven operates on natural gas, using 17,000
therms of natural gas for an entire year. A new, energy-efficient rotomold oven would operate on 15,000 therms of natural gas for an
entire year. After seeking out price quotes from a few suppliers, Diane determined that it would cost approximately $250,000 to
purchase a new, energy-efficient rotomold oven. She determines that the expected useful life of the new oven would be 10 years, and
it would have no salvage value at the end of its useful life. Current Designs would be able to sell the current oven today for $10,000.
Otherwise, its remaining useful life is estimated at 10 years with a zero salvage value.
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