One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs $80,000 and this price includes a complete guarantec of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The salvage value and maintenance costs are also summarized in the table. Both the old and new ovens have similar productivities and energy costs. If the MARR equals 10%, which one of the following statements is true? Old Oven Salvage value at the end of the year Operating and Maintenance Year cost

One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs $80,000 and this price includes a complete guarantec of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The salvage value and maintenance costs are also summarized in the table. Both the old and new ovens have similar productivities and energy costs. If the MARR equals 10%, which one of the following statements is true? Old Oven Salvage value at the end of the year Operating and Maintenance Year cost

Name: One of the four ovens at a bakery is being considered for replacement
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the tablebelow for several years. A new oven costs $80,000 and this price includes a complete guarantee of the maintenance co

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Warrick Water Company, a privately owned business, supplies water to several communities. Warrick…

A: The cost of asset is only recognized when it will flow future economic benefit to the entity and the…

Q: At the beginning of the year 2022, DeAngelo Caterering bought a $60,000 food truck. It will require…

A: Cost of asset not just include the purchase cost, but it also includes the expenditure incurred to…

Q: University Car Wash built a deluxe car wash across the street from campus. The new machines cost…

A: Depreciation means decline in the estimation of benefit inside its valuable life because of mileage…

Q: As a result of improvements in product engineering, United Automation is able to sell one of its two…

A: Introduction: Equivalent annual cost reveals the cost per year of any project to take decision…

Q: Legend Service Center just purchased an automobile hoist for $27,600. The hoist has an 8-year life…

A: Payback period :— It is the time period in years required to recover all cash outflow from cash…

Q: Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they…

A: Npv is also known as Net present value. It is a capital budegting technique which helps in decision…

Q: Bonita Inc., a manufacturer of steel school lockers, plans to purchase a new punch press for use in…

A: The present value of any cash flow or amount refers to the current dollar worth of the payments…

Q: A contractor has purchased a wheel loader for $115,000 and plans to use it 2,000 hours per year. The…

A: Answer:- Depreciation meaning:- An asset loses value over time as a result of use, damage or…

Q: Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one…

A: Bid ABid BParking area1270012700Maintenance cost per unit0.250.1Surface cost5.510.75The required…

Q: A company is considering several mutually exclusive ways that can meet a requirement for a filling…

A: Installation Costs = 8,000 Revenues = 25,000 per year Alternative 1 Initial Cost = 75,000 N = 6…

Q: University Car Wash built a deluxe car wash across the street from campus. The new machines cost…

A: Depreciation expense is the non-cash outlay which is reported in the books to record the regular…

Q: Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one…

A: A bid price is the amount that someone is prepared to pay for any kind of item, be it a contract,…

Q: Bramble Inc. plans to purchase a new metal stamping machine for use in its manufacturing process.…

A: Present value:The concept of present value is fundamental in financial analysis, especially when…

Q: As a result of improvements in product engineering, United Automation is able to sell one of its two…

A: There are two options available to the company.Option 1: Selling the old machinery and retaining new…

Q: Jayco, Inc. would like to set up a new plant. Currently, Jayco has the opportunity to buy an…

A: Net present value of this project needs to be determined to understand if the project can be…

Q: Because of rapidly advancing technology, Stuart publications Corporation is considering replacing…

A: Formula The annual operating cost of using old machine = ( Market value - salvage value ) ×…

Q: An investor is considering the purchase of an existing suburban office building approximately five…

A: Cost refers to the amount that is exchanged for acquiring an asset. However, cost also includes all…

Q: The following information applies to the questions displayed below.) University Car Wash built a…

A: Depreciation is the allocation of cost of asset over the useful life of the asset.

Q: An investor is considering the purchase of an existing suburban office building approximately five…

A: As per the given information:To determine:The estimated value for this property.The estimated…

Q: Assume that Walmart Inc. has decided to surface and maintain for 10 years a vacant lot next to one…

A: Given::Area= 12000 sq. yardWorking Notes (WN):WN # 1Bid AInstallation cost =…

Q: Blossom, Inc. is considering the purchase of a warehouse directly across the street from its…

A: Net present value is the excess of present value of cash inflows over cash outflows.

Q: It is desired to determine how much longer a forklift truck should remain in service before it is…

A: EUAC: It is a uniform annual cost of a project or an asset based on which replacement decision is…

Q: A granary purchases a conveyor used in the manufacture of grain for transporting, filling, or…

A: The question is based on the concept of replacement decision of a machine based on maintenance and…

Q: k will have a zero-salvage value. iSooky O in return for trading in its old spotter tra 00 per year.…

A: A rise in the total profit a company makes from its main activities is referred to as an increase in…

Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table
below for several years. A new oven costs $80,000 and this price includes a complete guarantee of the maintenance costs for the first
two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The salvage value and maintenance costs are
also summarized in the table. Both the old and new ovens have similar productivities and energy costs. If the MARR equals 10%,
which one of the following statements is true?
Old Oven
Salvage value at the end of
Year
Operating and Maintenance
the year
cost
$20000
1
$17000
$6487
$14000
$11000
$7,000
$6587
$6687
4
$6687
New Oven
Salvage value at the end of
the year
Year
Operating and Maintenance
cost
$80000
1
$76000
$70000
3
$66000
$1000
4
$62000
$3000
Do not replace at all; economic service life of the challenger is 1 year.
O Replace now; economic service life of challenger is 3 years.
O Replace at the end of year 1; economic service life of challenger is 4 years.
Not enough information to determine replacement period, economic service life of challenger is 1 year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

University Car Wash built a deluxe car wash across the street from campus. The new machines cost $255,000 including installation. The company estimates that the equipment will have a residual value of $22,500. University Car Wash also estimates it will use the machine for six years or about 12,500 total hours. Actual use per year was as follows: Year Hours Used 1 3,100 2 1,600 3 1,700 4 2,300 5 2,100 6 1,700 2. Prepare a depreciation schedule for six years using the double-declining-balance method. (Do not round your intermediate calculations.)
88-90: One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs $80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The salvage value and maintenance costs are also summarized in the table. Old Oven New Oven Year EUAC EUAC $14,500.00 $13,000.00 14,404.80 12,762.00 14,312.60 12,531.50 4 14,439.60 12,762.55 What is the economic life of the defender? O 2 O 3 O 4 O 1 1. 2. 3.
Legend Service Center just purchased an automobile hoist for $36,800. The hoist has an 8-year life and an estimated salvage value of $3,800. Installation costs and freight charges were $4,100 and $700, respectively. Legend uses straight-line depreciation.The new hoist will be used to replace mufflers and tires on automobiles. Legend estimates that the new hoist will enable his mechanics to replace 5 extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $38, and the labor cost to install a muffler is $14.(a)Compute the cash payback period for the new hoist. Cash payback period years (b)Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, e.g. 10.52%.) Annual rate of return %
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $240,000 including installation. The company estimates that the equipment will have a residual value of $30,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,600 2 2,100 3 2,200 4 1,800 5 1,600 6 1,700 1)Prepare a depreciation schedule for six years using the double-declining-balance method. 2)Prepare a depreciation schedule for six years using the activity-based method
Peyton Manufacturing is trying to decide between two different conveyor belt systems. System A costs $260,000, has a four-year life, and requires $80,000 in pretax annual operating costs. System B costs $366,000, has a six-year life, and requires $74,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Whichever system is chosen, it will not be replaced when it wears out. The tax rate is 25 percent and the discount rate is 9 percent. Calculate the NPV for both conveyor belt systems. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16.) System A System B Which conveyor belt system should the firm choose? O System A O System B 4
A company has decided to replace its inspection machine with an advanced one. The advanced machine costs $15,000 and will have operating costs of $3,600 in the first year, increasing by $2,000 per year thereafter. The expected salvage value of the new machine is $6,000 at the end of the first year and will decline by 10% of the preceding S.V. each year. Find the missing values in the following table and determine the economic life of the new machine. Total Cost (8%) CR (8%) OC (8%) 3,600 1 10,200 13,800 2 ? ? ... .... .. 3 4332.36 5,495.82 ? 4 ? 6,406.46 ? .......... . 3086.31 7,293.42 10,379.73 OPTIMAL n = A+ta ch Cilo
Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they have the costs shown in the following table: Machine A Machine B Original Cost $15,000 $24,000 Labor per year $2,400 $4,000 Maintenance per year $4,300 $800 Salvage value $2,000 $7,500 He is told to assume that: 1. The life of each machine is 3 years. 2. The company thinks it knows how to make 14% on investments no more risky than this one. 3. Labor and maintenance are paid at the end of the year. The NPV for Machine B= $._____enter your response here
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $246,000 including installation. The company estimates that the equipment will have a residual value of $27,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours. Actual use per year was as follows: Year Hours Used 1 2,800 2 1,900 3 2,000 4 2,000 5 1,800 6 1,500 Problem 7-5A Part 1 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $228,000 including installation. The company estimates that the equipment will have a residual value of $24,000. University Car Wash also estimates it will use the machine for six years or about 12,000 total hours, actual use per year as follows: 1 year 3,000 hours; 2 years 1,700 hours; 3 years, 1,800 hours, 4 years 2,200 hours 5 years 2,000 hours 6 years 1,300 hours. Prepare depreciation schedule for 6 years using the activity based method
The Darlington Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $8,500 per year. If the machine is not replaced, it can be sold for $5,000 at the end of its useful life. A new machine can be purchased for $170,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $45,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $50,000. The firm's tax rate is 25%. The appropriate WACC is 9%. If the new machine is purchased, what is the amount of the initial cash flow at Year 0 after bonus depreciation is considered? Cash outflow should be indicated by a minus sign. Round your answer to the nearest dollar.$…
Calligraphy Pens is deciding when to replace its old machine. The machine's current salvage value is $3,050,000. Its current book value is $1,800,000. If not sold, the old machine will require maintenance costs of $710,000 at the end of the year for the next five years. Depreciation on the old machine is $360,000 per year. At the end of five years, it will have a salvage value of $155,000 and a book value of $0. A replacement machine costs $4,650,000 now and requires maintenance costs of $380,000 at the end of each year during its economic life of five years. At the end of the five years, the new machine will have a salvage value of $745,000. It will be fully depreciated by the straight-line method. In five years, a replacement machine will cost $3,650,000. The company will need to purchase this machine regardless of what choice it makes today. The corporate tax rate is 25 percent and the appropriate discount rate is 7 percent. The company is assumed to earn sufficient revenues to…
University Car Wash built a deluxe car wash across the street from campus. The new machines cost $255,000 including installation. The company estimates that the equipment will have a residual value of $22,500. University Car Wash also estimates it will use the machine for six years or about 12,500 total hours. Actual use per year was as follows: Year Hours Used 1 3,100 2 1,600 3 1,700 4 2,300 5 2,100 6 1,700 Required: 1. Prepare a depreciation schedule for six years using the straight-line method. (Do not round your intermediate calculations.)