eplacement 45 Valley Pizza's owner bought his current pizza oven two years ago for $9.000, and it has one more of life remaining. He is using straight-line depreciation for the oven. He could purchase a new for $1,900, but it would last only one year. The owner figures the new oven would save him $2,gru annual operating expenses compared to operating the old one. Consequently, he has decided agais buying the new oven, since doing so would result in a "loss" of $400 over the next year. Required: I. How do you suppose the owner came up with $400 as the loss for the next year if the new pizza oven were purchased? Explain. 2. Criticize the owner's analysis and decision. 3. Prepare a correct analysis of the owner's decision. 14-32 Lamont Industries produces chemicals for the swimming pool industry. In one joint process, 10,00 pak 5, 14-6) Ions of GSX are processed into 7,000 gallons of xenolite and 3,000 gallons of banolide. The cost of the joint process, including the GSX, is $19,000. The firm allocates $13,300 of the joint cost to the unit and $5,700 of the cost to the banolide. The 3,000 gallons of banolide can be sold at the split-off pain for $2,500, or be processed further into a product called kitrocide. The sales value of 3,000 gallons of kitrocide is $10,000, and the additional processing cost is $8, 100. Required: Lamont's president has asked your consulting firm to make a recommendation as whether the banolide should be sold at the split-off point or processed further. Write a letter providing an analysis and a recommendation. cise 14-41 Resource Duo Company manufactures two products, Uno and Dos. Contribution margin data follow, Una Unit sales ... $13:00 Less variable cost: Direct material $ 7.00 Direct labor 1:07 Variable overhead 1.25 Variable selling and administrative cost .75 Total variable cost $10.00 Unit contribution margin .. 5 300 Duo company's production process uses highly skilled labor, which is in short supply. The same employ ees work on both products and earn the same wage rate. Required: Which of Duo Company's products is more profitable? Explain