Differential Analysis for a Lease or Sell Decision Burlington Construction Company is considering selling excess machinery with a book value of $279,600 (original cost of $399,400 less accumulated depreciation of $119,800) for $274,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,200 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,900. a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss. Differential Analysis Lease (Alt. 1) or Sell (Alt. 2) Machinery January 15 Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) Differential Effects (Alternative 2) Revenues $fill in the blank c06638f88f9ffe3_1 $fill in the blank c06638f88f9ffe3_2 $fill in the blank c06638f88f9ffe3_3 Costs fill in the blank c06638f88f9ffe3_4 fill in the blank c06638f88f9ffe3_5 fill in the blank c06638f88f9ffe3_6 Profit (Loss) $fill in the blank c06638f88f9ffe3_7 $fill in the blank c06638f88f9ffe3_8 $fill in the blank c06638f88f9ffe3_9 b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 1E: Differential analysis for a lease or sell decision Burlington Construction Company is considering...

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Differential Analysis for a Lease or Sell Decision

Burlington Construction Company is considering selling excess machinery with a book value of $279,600 (original cost of $399,400 less accumulated depreciation of $119,800) for $274,900, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $285,200 for five years, after which it is expected to have no residual value. During the period of the lease, Burlington Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $24,900.

a. Prepare a differential analysis dated January 15 to determine whether Burlington Construction Company should lease (Alternative 1) or sell (Alternative 2) the machinery. If required, use a minus sign to indicate a loss.

Differential Analysis
Lease (Alt. 1) or Sell (Alt. 2) Machinery
January 15
	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank c06638f88f9ffe3_1	$fill in the blank c06638f88f9ffe3_2	$fill in the blank c06638f88f9ffe3_3
Costs	fill in the blank c06638f88f9ffe3_4	fill in the blank c06638f88f9ffe3_5	fill in the blank c06638f88f9ffe3_6
Profit (Loss)	$fill in the blank c06638f88f9ffe3_7	$fill in the blank c06638f88f9ffe3_8	$fill in the blank c06638f88f9ffe3_9

b. On the basis of the data presented, would it be advisable to lease or sell the machinery?

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