Question
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
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
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