The proposal be accepted.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
EX25-10
this is an excel style practice problem

Transcribed Image Text:Kim Kwon Digital Components Company assembles circuit boards by using a
manually operated machine to insert electronic components. The original cost of the
machine is $60,000, the accumulated depreciation is $24,000, its remaining useful life
is five years, and its residual value is negligible. On May 4 of the current year, a
proposal was made to replace the present manufacturing procedure with a fully automatic machine
that has a purchase price of $180,000. The automatic machine has an estimated useful life of five
years and no significant residual value. For use in evaluating the proposal, the accountant
accumulated the following annual data on present and proposed operations:
Sales
Direct materials
Direct labor
Power and maintenance
Taxes, insurance, etc.
Selling and administrative expenses
Total expenses
Present
Operations
$205,000
$ 72,000
51,000
5,000
1,500
45,000
$174,500
Proposed
Operations
$205,000
$ 72,000
18,000
4,000
45,000
$139,000
Excel

Transcribed Image Text:a.
b.
Revenues:
Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
May 4
Continue with
Old Machine
(Alternative 1)
Sales (5 years)
Costs:
Purchase price
Direct materials (5 years)
Direct labor (5 years)
Power and maintenance (5 years)
Taxes, insurance, etc. (5 years)
Selling and admin. expenses (5 years)
Income (loss)
The proposal
be accepted.
Replace
Old Machine
(Alternative 2)
Differential Effect
on Income
(Alternative 2)
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