Question Content Area Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000, and its remaining useful life is five years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of five years. Question Content Area Prepare a differential analysis. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue with (Alternative 1) or Replace (Alternative 2) Old Machineblank Line Item Description Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues: blank blank blank Proceeds from sale of old machine $Proceeds from sale of old machine $Proceeds from sale of old machine $Proceeds from sale of old machine Costs: Purchase price Purchase price Purchase price Purchase price Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Profit (loss) Question Content Area Should the machine be replaced?
Question Content Area Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000, and its remaining useful life is five years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of five years. Question Content Area Prepare a differential analysis. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue with (Alternative 1) or Replace (Alternative 2) Old Machineblank Line Item Description Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues: blank blank blank Proceeds from sale of old machine $Proceeds from sale of old machine $Proceeds from sale of old machine $Proceeds from sale of old machine Costs: Purchase price Purchase price Purchase price Purchase price Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Profit (loss) Question Content Area Should the machine be replaced?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question Content Area
Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000, and its remaining useful life is five years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of five years.
Question Content Area
Prepare a differential analysis. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Line Item Description |
Continue with Old Machine (Alternative 1) |
Replace Old Machine (Alternative 2) |
Differential Effects (Alternative 2) |
---|---|---|---|
Revenues: | blank | blank | blank |
Proceeds from sale of old machine | $Proceeds from sale of old machine | $Proceeds from sale of old machine | $Proceeds from sale of old machine |
Costs: | |||
Purchase |
Purchase price | Purchase price | Purchase price |
Variable |
Variable manufacturing costs (5 years) | Variable manufacturing costs (5 years) | Variable manufacturing costs (5 years) |
Question Content Area
Should the machine be replaced?
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