Lease or Sell

Astro Company owns a equipment with a cost of $367,300 and accumulated depreciation of $55,400 that can be sold for $274,000, less a 3% sales commission. Alternatively, Astro Company can lease the equipment to another company for three years for a total of $285,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $16,700 over the three years.

Prepare a differential analysis on March 23 as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Lease Machine (Alt. 1) or Sell Machine (Alt. 2)
March 23
	Lease Machine (Alternative 1)	Sell Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs
Income (Loss)	$	$	$

B). Product T has revenue of $193,800, variable cost of goods sold of $115,900, variable selling expenses of $34,000, and fixed costs of $61,200, creating a loss from operations of $17,300.

Prepare a differential analysis as of May 9, to determine whether Product T should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Continue Product T (Alt. 1) or Discontinue Product T (Alt. 2)
May 9
	Continue Product T (Alternative 1)	Discontinue Product T (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs:
Variable cost of goods sold
Variable selling and admin. expenses
Fixed costs
Income (Loss)	$	$	$

C). A restaurant bakes its own bread for a cost of $152 per unit (100 loaves), including fixed costs of $34 per unit. A proposal is offered to purchase bread from an outside source for $100 per unit, plus $12 per unit for delivery.

Prepare a differential analysis dated July 7 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread, assuming that fixed costs are unaffected by the decision. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Make Bread (Alt. 1) or Buy Bread (Alt. 2)
July 7
	Make Bread (Alternative 1)	Buy Bread (Alternative 2)	Differential Effect on Income (Alternative 2)
Selling Price	$0	$0	$0
Unit Costs:
Purchase price	$	$	$
Delivery
Variable costs
Fixed factory overhead
Income (Loss)	$	$	$