Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 7, Problem 7.14E
Use incremental analysis for retaining or replacing equipment decision.
(LO 5), AN
Johnson Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer with a faster model that would eliminate all of the overtime processing.
| Current Machine | New Machine | |
| Original purchase cost | $15,000 | $25,000 |
| $ 6,000 | — | |
| Estimated annual operating costs | $25,000 | $20,000 |
| Remaining useful life | 5 years | 5 years |
If sold now. the current machine would have a salvage value of $6.000. If operated for the remainder of its useful life, the current machine would have zero salvage value. The new machine is expected to have zero salvage value after 5 years.
Instructions
Should the current machine be replaced?
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Kingbird Enterprises uses a computer to handle its sales invoices. Lately, business has been so good that it takes an extra three hours
per night, plus every third Saturday, to keep up with the volume of sales invoices. Management is considering updating its computer
with a faster model that would eliminate all of the overtime processing. Data for the two computers are as follows:
Current Computer New Computer
Original purchase cost
$14,500
$25,400
Accumulated depreciation
$6,300
$0
Estimated operating costs
Useful life
$23,700
$19,600
5 years
5 years
If sold now, the current computer would have a salvage value of $10,500. If it is used for the remainder of its useful life, the current
computer would have zero salvage value. The new computer is expected to have zero salvage value after five years.
Determine whether the current computer should be replaced. (Ignore the time value of money.)
Current computer should be
The incremental analysis shows that net…
Question1:-
PC planet has just opened its doors. The new retail store sells
refurbished computers at a significant from market prices. The
variable cost PC for computers are planet $100 to purchase and
require (10 hours of labor at $15 per hours) and wages for sales
personnel $50 per computer. The newly refurbished computers are
resold to customers for $500. Rent (fixed cost) on the retail cost
the company $4000 per month.
1- How many computers does PC planet have to sell each
month to break even?
2- If PC planet wants to earn $5000 per month after all
expenses, how many computers does the company need to
sell?
3- PC planet can purchåse already refurbished computers for
$200. This would mean it need additional labor $50 per
computer. What would PC plants new breakeven pointbe if it
decided to purchase the computers already refurbished?
Chapter 7 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 7 - What steps are frequently involved in managements...Ch. 7 - Prob. 2QCh. 7 - Incremental analysis involves the accumulation of...Ch. 7 - Sydney Greene asks for your help concerning the...Ch. 7 - What data are relevant in deciding whether to...Ch. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - What are joint products? What accounting issue...Ch. 7 - Prob. 10Q
Ch. 7 - Your roommate. Gale Dunham, is confused about sunk...Ch. 7 - Prob. 12QCh. 7 - The steps in managements decision-making process...Ch. 7 - Determine incremental changes. (LO 1), AP Bogart...Ch. 7 - At Bargain Electronics, it costs 30 per unit (20...Ch. 7 - Prob. 7.4BECh. 7 - Prob. 7.5BECh. 7 - Prob. 7.6BECh. 7 - Prob. 7.7BECh. 7 - Lisah, Inc., manufactures golf clubs in three...Ch. 7 - Nathan T Corporation is comparing two different...Ch. 7 - Prob. 7.2DICh. 7 - Wilma Company must decide whether to make or buy...Ch. 7 - Prob. 7.4DICh. 7 - Prob. 7.5DICh. 7 - Prob. 7.6DICh. 7 - As a study aid. your classmate Pascal Adams has...Ch. 7 - Use incremental analysis for special-order...Ch. 7 - Moonbeam Company manufactures toasters. For the...Ch. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Use incremental analysis for make-or-buy decision....Ch. 7 - Prob. 7.7ECh. 7 - Prepare incremental analysis concerning...Ch. 7 - Anna Garden recently opened her own basketweaving...Ch. 7 - Stahl Inc. produces three separate products from a...Ch. 7 - Kirk Minerals processes materials extracted from...Ch. 7 - Prob. 7.12ECh. 7 - On January 2, 2016, Twilight Hospital purchased a...Ch. 7 - Use incremental analysis for retaining or...Ch. 7 - Veronica Mars, a recent graduate of Bells...Ch. 7 - Cawley Company makes three models of lasers....Ch. 7 - Tharp Company operates a small factory in which it...Ch. 7 - Identify relevant costs for different decisions....Ch. 7 - ThreePoint Sports Inc. manufactures basketballs...Ch. 7 - Use incremental analysis related to make or buy....Ch. 7 - Prob. 7.3APCh. 7 - Compute gain or loss, and determine if equipment...Ch. 7 - Brislin Company has four operating divisions....Ch. 7 - CURRENT DESIGNS Current Designs faces a number of...Ch. 7 - Decision-Making Across the Organization Aurora...Ch. 7 - MiniTek manufactures private-label small...Ch. 7 - Prob. 7.3BYPCh. 7 - Communication Activity Hank Jewell is a production...Ch. 7 - Prob. 7.6BYPCh. 7 - Prob. 7.7BYPCh. 7 - Considering Your Costs and Benefits School costs...
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