Q1:

A commercial oven with a book value of $29,600 has an estimated remaining 5 year life. A proposal is offered to sell the oven for $9,250 and replace it with a new oven costing $52,840. The new machine has a 5-year life with no residual value. The new machine would reduce annual maintenance costs by $10,160.

Provide a differential analysis on the proposal to replace the commercial oven.

Annual maintenance cost reduction	$
Number of years applicable
Total differential decrease in cost	$
Proceeds from sale of equipment		$
Cost of new equipment
Net differential decrease in cost from replacing equipment $

Q2:

Goshawks Co. produces an automotive product and incurs total manufacturing costs of $2,600,000 in the production of 80,000 units. The company desires to earn a profit equal to a 12% rate of return on assets of $960,000. Total selling and administrative expenses are $105,000.

a. Calculate the markup percentage, using the product cost concept. Round your answer to one decimal place. %

b. Compute the selling price per unit of the automotive product. Round your answer to two decimal places. $

Q3:

Heidi Company is considering the acquisition of a machine that costs $583,000. The machine is expected to have a useful life of 6 years, a negligible residual value, an annual net cash flow of $129,000, and annual operating income of $84,330. What is the estimated cash payback period for the machine (round to one decimal point)?

7.5 years

4.5 years

6.0 years

6.9 years