Question
A year ago, Crunchy Cola Corporation bought a stamping machine to make the cans for its cola. The cost of the machine was $60,000. The
A year ago, Crunchy Cola Corporation bought a stamping machine to make the cans for its cola. The cost of the machine was $60,000. The machine has a useful life of 5 years and a salvage value of zero at the end of those five years. One year of depreciation has been recorded. The variable manufacturing cost of producing the cans is $0.05 per can. The only fixed manufacturing cost is the annual depreciation of $12,000
on the stamping machine. Crunchy needs 200,000 cans annually.
Dagmar Stamping Company recently gave Crunchy an offer to supply all of its can needs for the next four years at $0.07 per can. If Crunchy buys from Dagmar, the stamping machine would not be needed and would be sold for $35,000. If Crunchy buys from Dagmar, what will be the total dollar increase or decrease in income for the next four years?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started