Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Hello, I need help with this question. TASKS Part A Kelisen Lid recently purchased a new dyeing machine for $100,000. Management expects the dyeing machine
Hello, I need help with this question.
TASKS Part A Kelisen Lid recently purchased a new dyeing machine for $100,000. Management expects the dyeing machine to generate the following additional revenues and expenses during its useful life. Average incremental revenue $50,000 per year Average incremental expenses (depreciation not included) $20,000 per year The dyeing machine has an expected life of 6 years and is depreciated using the straight line method You are required to: a) Prepare a schedule showing the incremental revenue, incremental operating expenses and incremental depreciation during each of the next 6 years. b) Calculate the accounting rate of return on the dyeing machine, using the initial investment as the denominator Part B Lenovo Ltd is planning to rent a factory on a four-year lease contract in China from 1 January 2014 to 2017, which will be used to produce a new laptop (model code-DL-GSB). Since the senior management is worried about the sustainability of the new plant they have decided to assess the new product for the upcoming four years' manufacturing and sales life. Under the lease, Lenovo Ltd will pay $100,000 annually in advance on 1 January The plant is expected to cost $600,000. This will be bought and paid for on 1 January 2014 and is expected to be scrapped with zero proceeds on 31 December 2017 The company is currently using straight-line method at 25% to depreciate all their fixed assets, and they have no intention to change this. Each unit of DL-G88 is estimated to give rise to a variabile labour cost of $200 and a variable material cost of $100 DL-GS8 manufacture will be charged with an annual share of the business's administrative costs. totalling about $15,000 a year The manufacture and sales of DL-GSs are expected to increase the total administrative costs by $90,000 each year. The following are estimated manufacture and sales numbers of DL-GS8 for the next four years. Year ending 31 December Units of DL-GS8 2014 400 2015 2016 500 800Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored 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