Answered: n a cost center, the manager has…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

In a cost center, the manager has responsibility and authority for making decisions that affect

a. costs

b. investments in assets

c. both costs and revenues

d. revenues

Keating Co. is considering disposing of equipment with a cost of $68,000 and accumulated depreciation of $47,600. Keating Co. can sell the equipment through a broker for $27,000 less 8% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $46,000. Keating will incur repair, insurance, and property tax expenses estimated at $10,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is

a. $11,160

b. $7,812

c. $16,740

d. $13,392

If sales are $828,000, variable costs are 68% of sales, and operating income is $278,000, what is the contribution margin ratio?

a. 64%

b. 36%

c. 68%

d. 32%

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