Problem 1 Bisha Corporation is considering trading a truck with a book value of SAR 52,000 with an estimated five-year life for a new truck that would cost SAR 80,000. The old truck could be sold for SAR 55,000. The new truck has a five-year life with no residual value. The new truck would reduce annual operating costs by SAR 4,300 per year. Prepare a differential analysis on whether to continue with the old machine (Alternative 1) or purchase the new machine (Alternative 2). Problem 2 A condensed income statement by product line for Yanbu Baking Inc. indicated the following for Almond Cookies for the past year: Sales SAR 1,200,000 Cost of goods sold 700,000 Gross profit 500,000 Operating expenses 570,000 Loss from operations (SAR 70,000) It is estimated that 20% of the cost of goods sold represents fixed factory overhead costs, and that 25% of the operating expenses are fixed. Because Almond Cookies is only one of the many products, the fixed costs will not be materially affected if the product is discontinued. Prepare a differential analysis to determine whether Almond Cookies should be continued (Alternative 1) or discontinued (Alternative 2). Should Almond Cookies be retained? Explain and indicate the dollar difference in favor or against. Problem 3 Asbtar Company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is SAR 65 per unit (100 bottles), including fixed costs of SAR 14 per unit. A proposal is offered to purchase small bottles from an outside source for SAR 42 per unit, plus SAR 3 per unit for freight. Prepare a differential analysis to determine whether the company should make (Alternative 1) or buy (Alternative 2) for bottles, assuming fixed costs are not affected by the decision. Problem 4 Product K12 is produced for SAR 14 per gallon. Product K12 can be sold without additional processing for SAR 22 per gallon or processed further into Product M27 at an additional cost of SAR 7 per gallon. Product M27 can be sold for SAR 27 per gallon. Prepare a differential analysis on whether to sell Product K12 (Alternative 1), or process further into Product M27 (Alternative 2). You must show all your work