Line Item Description October 1 Continue with Old Machine (Alternative 1) Replace Old Machine Differential Effects (Alternative 2) (Alternative 2) Revenues: Sales (5 years) Costs: 1,347,500 1,347,500 Purchase price 0 176,800 176,800 Direct materials (5 years) 459,000 459,000 0 Direct labor (5 years) 319,000 0 319,000 Power and maintenance (5 years) 30,000 157,500 -127,500 Taxes, insurance, etc. (5 years) 10,500 35,500 -25,000 Selling and admin. expenses (5 years) 319,000 319,000 0 Profit (loss) A b. Based only on the data presented, should the proposal be accepted? Should not be accepted c. Differences in capacity between the two alternatives is relevant to consider before a final decision is made.
Line Item Description October 1 Continue with Old Machine (Alternative 1) Replace Old Machine Differential Effects (Alternative 2) (Alternative 2) Revenues: Sales (5 years) Costs: 1,347,500 1,347,500 Purchase price 0 176,800 176,800 Direct materials (5 years) 459,000 459,000 0 Direct labor (5 years) 319,000 0 319,000 Power and maintenance (5 years) 30,000 157,500 -127,500 Taxes, insurance, etc. (5 years) 10,500 35,500 -25,000 Selling and admin. expenses (5 years) 319,000 319,000 0 Profit (loss) A b. Based only on the data presented, should the proposal be accepted? Should not be accepted c. Differences in capacity between the two alternatives is relevant to consider before a final decision is made.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Line Item Description
October 1
Continue with
Old Machine
(Alternative 1)
Replace Old Machine Differential Effects
(Alternative 2)
(Alternative 2)
Revenues:
Sales (5 years)
Costs:
1,347,500
1,347,500
Purchase price
0
176,800
176,800
Direct materials (5 years)
459,000
459,000
0
Direct labor (5 years)
319,000
0
319,000
Power and maintenance (5 years)
30,000
157,500
-127,500
Taxes, insurance, etc. (5 years)
10,500
35,500
-25,000
Selling and admin. expenses (5 years)
319,000
319,000
0
Profit (loss)
A
b. Based only on the data presented, should the proposal be accepted?
Should not be accepted
c. Differences in capacity between the two alternatives is relevant
to consider before a final decision is made.
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