Last year (2013), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator's speed, the comfort of the ride, and cost-efficiency. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data on the new elevator. In addition, he asked the company's accountant to provide him with cost data on the company's elevator. This information is presented below. Old Elevator New Elevator Purchase price Estimated salvage value Estimated useful life $95,550 $159,693 0 0 5 years 4 years Depreciation method Straight-line Straight-line Annual operating costs other than depreciation: Variable $34,530 $10,076 Fixed 22,535 8,890 Annual revenues are $240,910, and selling and administrative expenses are $28,070, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2014, Richter Condos will be able to sell it for $24,589. Determine any gain or loss if the old elevator is replaced.

Last year (2013), Richter Condos installed a mechanized elevator for its tenants. The owner of the company, Ron Richter, recently returned from an industry equipment exhibition where he watched a computerized elevator demonstrated. He was impressed with the elevator's speed, the comfort of the ride, and cost-efficiency. Upon returning from the exhibition, he asked his purchasing agent to collect price and operating cost data on the new elevator. In addition, he asked the company's accountant to provide him with cost data on the company's elevator. This information is presented below. Old Elevator New Elevator Purchase price Estimated salvage value Estimated useful life $95,550 $159,693 0 0 5 years 4 years Depreciation method Straight-line Straight-line Annual operating costs other than depreciation: Variable $34,530 $10,076 Fixed 22,535 8,890 Annual revenues are $240,910, and selling and administrative expenses are $28,070, regardless of which elevator is used. If the old elevator is replaced now, at the beginning of 2014, Richter Condos will be able to sell it for $24,589. Determine any gain or loss if the old elevator is replaced.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 6E: Keith Golding has decided to purchase a personal computer. He has narrowed his choices to two: Brand...

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