Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent $69,000 refurbishing the lift. It has just determined that another $33,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $143,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $23,000 per year. Darcy Roofing could also rent out the new lift for about $8,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $21,000 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Operating expenses $ Repair costs Rental revenue New machine cost Sale of old machine Total cost $ The equipment Retain Equipment Should company repair or replace the equipment? be replaced. $ LA $ Replace Equipment $ GA $ Net Income Increase (Decrease)
Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent $69,000 refurbishing the lift. It has just determined that another $33,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $143,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $23,000 per year. Darcy Roofing could also rent out the new lift for about $8,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $21,000 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Operating expenses $ Repair costs Rental revenue New machine cost Sale of old machine Total cost $ The equipment Retain Equipment Should company repair or replace the equipment? be replaced. $ LA $ Replace Equipment $ GA $ Net Income Increase (Decrease)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large
homes and commercial properties. Last year, Darcy Roofing spent $69,000 refurbishing the lift. It has just determined that another
$33,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $143,000. The company estimates
that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about
$23,000 per year. Darcy Roofing could also rent out the new lift for about $8,500 per year. The old lift is not suitable for rental. The
old lift could currently be sold for $21,000 if the new lift is purchased.
Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts
using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Operating expenses $
Repair costs
Rental revenue
New machine cost
Sale of old machine
Total cost
$
The equipment
Retain
Equipment
Should company repair or replace the equipment?
▾ be replaced.
$
LA
LA
$
Replace
Equipment
LA
$
$
Net Income
Increase (Decrease)
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