Differential Analysis for a Lease-or-Buy Decision

Urban Styles Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,380. The freight and installation costs for the equipment are $640. If purchased, annual repairs and maintenance are estimated to be $380 per year over the four-year useful life of the equipment. Alternatively, Urban Styles can lease the equipment from a domestic supplier for $1,500 per year for four years, with no additional costs.

Prepare a differential analysis dated December 11 to determine whether Urban Styles should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0".

Differential Analysis
Lease Machine (Alt. 1) or Buy Machine (Alt. 2)
December 11
	Lease Machine (Alternative 1)	Buy Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$0	$0	$0
Costs:
Purchase price	$fill in the blank cbdb7a003079064_1	$fill in the blank cbdb7a003079064_2	$fill in the blank cbdb7a003079064_3
Freight and installation	fill in the blank cbdb7a003079064_4	fill in the blank cbdb7a003079064_5	fill in the blank cbdb7a003079064_6
Repair and maintenance (4 years)	fill in the blank cbdb7a003079064_7	fill in the blank cbdb7a003079064_8	fill in the blank cbdb7a003079064_9
Lease (4 years)	fill in the blank cbdb7a003079064_10	fill in the blank cbdb7a003079064_11	fill in the blank cbdb7a003079064_12
Income (Loss)	$fill in the blank cbdb7a003079064_13	$fill in the blank cbdb7a003079064_14	$fill in the blank cbdb7a003079064_15

Determine whether Urban Styles should lease (Alternative 1) or buy (Alternative 2) the equipment.