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Buchanan Co. is considering replacing a machine that is presently used in its production process. Which of the following amounts represents a sunk cost? Replacement
Buchanan Co. is considering replacing a machine that is presently used in its production process. Which of the following amounts represents a sunk cost? Replacement Old Machine Machine Original cost $55,000 $45,000 Remaining useful life in years 5 5 Current age in years 5 0 Book value $33,000 Current disposal value in cash $9,000 Future disposal value in cash in 5 years) $0 SO Annual cash operating costs $8,000 $4,000 Select one: A. $9.000 B. $45,000 C. $55,000 D. $33,000 E. None of the above. Reagan Company is a price-taker and uses a target-pricing approach. Refer to the following information: Production volume 800,000 units per year Market price $45 per unit Desired operating income 17% of total assets Total assets $13,900,000 What is the desired profit for the year? Select one: A $102,000 B. $4,100,000 C. $18,000,000 D. $2,363,000 E. None of the above. Ford Inc. manufactures and sells watches for $40 each. Truman Company has offered Ford $25 per watch for a one-time order of 5,000 watches. The total manufacturing cost per watch is $28 per unit and consists of variable costs of $20 per watch and fixed overhead costs of $8 per watch. Assume that Ford has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order? Select one: A. decrease of $25,000 0 B. decrease of $125,000 C. increase of $25,000 D. increase of $125,000 E. None of the above. Buchanan Co. is considering replacing a machine that is presently used in its production process. Which of the following amounts represents a sunk cost? Replacement Old Machine Machine Original cost $55,000 $45,000 Remaining useful life in years 5 5 Current age in years 5 0 Book value $33,000 Current disposal value in cash $9,000 Future disposal value in cash in 5 years) $0 SO Annual cash operating costs $8,000 $4,000 Select one: A. $9.000 B. $45,000 C. $55,000 D. $33,000 E. None of the above. Reagan Company is a price-taker and uses a target-pricing approach. Refer to the following information: Production volume 800,000 units per year Market price $45 per unit Desired operating income 17% of total assets Total assets $13,900,000 What is the desired profit for the year? Select one: A $102,000 B. $4,100,000 C. $18,000,000 D. $2,363,000 E. None of the above. Ford Inc. manufactures and sells watches for $40 each. Truman Company has offered Ford $25 per watch for a one-time order of 5,000 watches. The total manufacturing cost per watch is $28 per unit and consists of variable costs of $20 per watch and fixed overhead costs of $8 per watch. Assume that Ford has excess capacity and that the special pricing order would not adversely affect regular sales. What is the change in operating income that would result from accepting the special sales order? Select one: A. decrease of $25,000 0 B. decrease of $125,000 C. increase of $25,000 D. increase of $125,000 E. None of the above
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