Lease or Sell

Felix Company owns a equipment with a cost of $366,600 and accumulated depreciation of $57,000 that can be sold for $274,800, less a 5% sales commission. Alternatively, Felix Company can lease the equipment to another company for three years for a total of $284,200, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Felix Company on the equipment would total $16,700 over the three years.

Prepare a differential analysis on March 23 as to whether Felix 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 Equipment (Alt. 1) or Sell Equipment (Alt. 2)
March 23
	Lease Equipment (Alternative 1)	Sell Equipment (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues	$	$	$
Costs
Income (Loss)	$	$	$

Should Felix Company lease (Alternative 1) or sell (Alternative 2) the equipment?

Part 2

A restaurant bakes its own bread for a cost of $152 per unit (100 loaves), including fixed costs of $36 per unit. A proposal is offered to purchase bread from an outside source for $101 per unit, plus $11 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 "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)
Sales price	$0	$0	$0
Unit Costs:
Purchase price	$	$	$
Delivery
Variable costs
Fixed factory overhead
Income (Loss)	$	$	$

Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bread.