Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Textbook Question
Chapter 11, Problem 2PA
Differential analysis for machine replacement proposal
Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Instructions
- 1. Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential profit that would result over the six-year period if the new machine is acquired.
- 2. List other factors that should be considered before a final decision is reached.
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Differntial analysis for machine replacement proposal
Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years.Relevant data associated with the operations of the old machine and the new machine.neither of which has any estimated residual value,are as follows:
Annual nonmanfacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Instructions
1. Prepare a differential analysis as of april 30 comparing operations using the present machine (alternative 1 ) with operations using the new machine (alternative 2 ).The analysis should indicate the total differntial income that would result over the six-years period if the new machine is acquired.
2 List other factors that should be considered before a final decision is reached.
Differential Analysis for Machine Replacement Proposal
Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:
Old Machine
Cost of machine, 10-year life
$89,000
Annual depreciation (straight-line)
8,900
Annual manufacturing costs, excluding depreciation
23,600
Annual nonmanufacturing operating expenses
6,100
Annual revenue
74,200
Current estimated selling price of machine
29,700
New Machine
Purchase price of machine, six-year life
$119,700
Annual depreciation (straight-line)
19,950
Estimated annual manufacturing costs, excluding depreciation
6,900
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Required:
Prepare a differential…
Differential Analysis for Machine Replacement
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 $67,700, the accumulated depreciation is $27,100, 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 $140,800. 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:
Present Operations
Proposed Operations
Sales
$214,600
$214,600
Direct materials
$73,100
$73,100
Direct labor
50,800
—
Power and maintenance
4,700
25,000
Taxes, insurance, etc.
1,700
5,600
Selling and administrative expenses…
Chapter 11 Solutions
Managerial Accounting
Ch. 11 - Explain the meaning of (A) differential revenue,...Ch. 11 - A company could sell a building for 250,000 or...Ch. 11 - A chemical company has a commodity-grade and...Ch. 11 - A company accepts incremental business at a...Ch. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Although the cost-plus approach to product pricing...Ch. 11 - How does the target cost method differ from...Ch. 11 - Prob. 10DQ
Ch. 11 - Lease or sell Plymouth Company owns equipment with...Ch. 11 - Prob. 2BECh. 11 - Make or buy A company manufactures various-sized...Ch. 11 - Replace equipment A machine with a book value of...Ch. 11 - Prob. 5BECh. 11 - Prob. 6BECh. 11 - Prob. 7BECh. 11 - Prob. 8BECh. 11 - Differential analysis for a lease or sell decision...Ch. 11 - Prob. 2ECh. 11 - Differential analysis for a discontinued product A...Ch. 11 - Differential analysis for a discontinued product...Ch. 11 - Prob. 5ECh. 11 - Prob. 6ECh. 11 - Make-or-buy decision Somerset Computer Company has...Ch. 11 - Prob. 8ECh. 11 - Machine replacement decision A company is...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Sell or process further Calgary Lumber Company...Ch. 11 - Sell or process further Dakota Coffee Company...Ch. 11 - Prob. 13ECh. 11 - Accepting business at a special price Box Elder...Ch. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Product cost method of product costing Smart...Ch. 11 - Target costing Toyota Motor Corporation (TM) uses...Ch. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21ECh. 11 - Total cost method of product pricing Based on the...Ch. 11 - Variable cost method of product pricing Based on...Ch. 11 - Differential analysis involving opportunity costs...Ch. 11 - Differential analysis for machine replacement...Ch. 11 - Differential analysis for sales promotion proposal...Ch. 11 - Prob. 4PACh. 11 - Product pricing and profit analysis with...Ch. 11 - Product pricing using the cost-plus approach...Ch. 11 - Prob. 1PBCh. 11 - Differential analysis for machine replacement...Ch. 11 - Prob. 3PBCh. 11 - Prob. 4PBCh. 11 - Prob. 5PBCh. 11 - Prob. 6PBCh. 11 - Analyze Pacific Airways Pacific Airways provides...Ch. 11 - Service yield pricing and differential equations...Ch. 11 - Prob. 3MADCh. 11 - Prob. 4MADCh. 11 - Aaron McKinney is a cost accountant for Majik...Ch. 11 - Prob. 3TIFCh. 11 - Decision on accepting additional business A...Ch. 11 - Accepting service business at a special price If...Ch. 11 - Identifying product cost distortion Peachtree...Ch. 11 - Prob. 1CMACh. 11 - Prob. 2CMACh. 11 - Aril Industries is a multiproduct company that...Ch. 11 - Oakes Inc. manufactured 40,000 gallons of Mononate...
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