Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please show working note. thank you Blue Sky Catering is considering whether to retain or replace its aging delivery truck. The old truck originally cost

image text in transcribed

Please show working note. thank you

Blue Sky Catering is considering whether to retain or replace its aging delivery truck. The old truck originally cost $51,000 when it was purchased nine years ago. It has a book value of $6,000. According to the mechanic who serviced the truck during its last oil change, the old truck has 3 years of useful life left. Blue Sky Catering wants to purchase a brand-new truck. The new truck costs $66,000 and has a 10-year useful life, after which it will have no salvage value. The new truck is a little larger and would accommodate larger jobs, leading to an additional $11,000 per year in contribution margin. It would also have a refrigerated section that would reduce waste by $900 each year. As the truck will be new, repairs and maintenance costs will also decrease from $3,000 to $2,300 annually. The old truck can be sold for $8,000. Prepare a quantitative analysis to determine whether or not to purchase the new truck. Do not enter dollar signs or commas in the input boxes. Use the negative sign for values that must be subtracted. Retain Truck Replace Truck Repair and maintenance costs $ $ Waste $ $ Additional contribution margin $ $ Cost of new truck $ $ Sale of old truck IS $ Total Costs $ $ Should they retain their old truck or replace it

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of Income Distribution Volume 2A

Authors: Anthony B. Atkinson, Francois Bourguignon

1st Edition

0444594280, 978-0444594280

More Books

Students also viewed these Finance questions

Question

What are some different types of leadership power? AppendixLO1

Answered: 1 week ago