New England Ski Co. is considering replacing an existing piece of equipment that can be sold immediately for $34,000. If not rep immediately, it can be used for the next eight years when its salvage value will be $7,500. The new equipment being considered also have a useful life of eight years when it can be sold for 10% of its current acquisition cost of $175,000. If purchased, the new equipment will have the following associated costs: shipping - $6,500; sales tax - $14,800; and, installation - $9,600. By replacing the old equipment with the new machine, New England Ski will be able to increase annual sales from 3,000 units to units. The following table lists details of sales price and production costs. $150 $55 $15 8% of Sales $30 Price per unit Direct variable cost per unit Indirect variable cost per unit Sales commission Shipping and packaging cost per unit Incremental fixed cost $35,000 8 years Depreciation - Straight line What is the annual depreciation on the new machine? How should New England treat it? $19,688; include in cash flows O $21,875; include in cash flows O $21,875; exclude O $19,688; exclude Save for Later Submit Ar

New England Ski Co. is considering replacing an existing piece of equipment that can be sold immediately for $34,000. If not rep immediately, it can be used for the next eight years when its salvage value will be $7,500. The new equipment being considered also have a useful life of eight years when it can be sold for 10% of its current acquisition cost of $175,000. If purchased, the new equipment will have the following associated costs: shipping - $6,500; sales tax - $14,800; and, installation - $9,600. By replacing the old equipment with the new machine, New England Ski will be able to increase annual sales from 3,000 units to units. The following table lists details of sales price and production costs. $150 $55 $15 8% of Sales $30 Price per unit Direct variable cost per unit Indirect variable cost per unit Sales commission Shipping and packaging cost per unit Incremental fixed cost $35,000 8 years Depreciation - Straight line What is the annual depreciation on the new machine? How should New England treat it? $19,688; include in cash flows O $21,875; include in cash flows O $21,875; exclude O $19,688; exclude Save for Later Submit Ar

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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