Q1. Differential Analysis for a Lease-or-Sell Decision

Sure-Bilt Construction Company is considering selling excess machinery with a book value of $281,100 (original cost of $400,800 less accumulated depreciation of $119,700) for $275,300, less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $283,400 for five years, after which it is expected to have no residual value. During the period of the lease, Sure-Bilt Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $26,000

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a. Prepare a differential analysis, dated May 25 to determine whether Sure-Bilt should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Lease Machinery (Alternative 1)	Sell Machinery (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 9b3330051fdbf9a_1	$fill in the blank 9b3330051fdbf9a_2	$fill in the blank 9b3330051fdbf9a_3
Costs	fill in the blank 9b3330051fdbf9a_4	fill in the blank 9b3330051fdbf9a_5	fill in the blank 9b3330051fdbf9a_6
Profit (loss)	$fill in the blank 9b3330051fdbf9a_7	$fill in the blank 9b3330051fdbf9a_8	$fill in the blank 9b3330051fdbf9a_9

Q2. Differential Analysis for a Lease-or-Buy Decision

Urban Styles Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,180. The freight and installation costs for the equipment are $610. If purchased, annual repairs and maintenance are estimated to be $390 per year over the 4-year useful life of the equipment. Alternatively, Urban Styles can lease the equipment from a domestic supplier for $1,580 per year for 4 years, with no additional costs.

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Prepare a differential analysis dated December 11 to determine whether Urban Styles should Lease Equipment (Alternative 1) or Buy Equipment (Alternative 2). Hint: This is a lease-or-buy decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Lease Equipment (Alternative 1)	Buy Equipment (Alternative 2)	Differential Effects (Alternative 2)
Unit costs:
Purchase price	$fill in the blank 0f5dc2f9afc8fae_1	$fill in the blank 0f5dc2f9afc8fae_2	$fill in the blank 0f5dc2f9afc8fae_3
Freight and installation	fill in the blank 0f5dc2f9afc8fae_4	fill in the blank 0f5dc2f9afc8fae_5	fill in the blank 0f5dc2f9afc8fae_6
Repair and maintenance (4 years)	fill in the blank 0f5dc2f9afc8fae_7	fill in the blank 0f5dc2f9afc8fae_8	fill in the blank 0f5dc2f9afc8fae_9
Lease (4 years)	fill in the blank 0f5dc2f9afc8fae_10	fill in the blank 0f5dc2f9afc8fae_11	fill in the blank 0f5dc2f9afc8fae_12
Total unit costs	$fill in the blank 0f5dc2f9afc8fae_13	$fill in the blank 0f5dc2f9afc8fae_14	$fill in the blank 0f5dc2f9afc8fae_15

Q3. Differential Analysis for a Discontinued Product

A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year:

Sales	$236,600
Cost of goods sold	108,000
Gross profit	$128,600
Operating expenses	143,000
Loss from operations	$(14,400)

It is estimated that 16% of the cost of goods sold represents fixed factory overhead costs and that 20% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued.

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a. Prepare a differential analysis, dated March 3, to determine whether to Continue Royal Cola (Alternative 1) or Discontinue Royal Cola (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Continue Royal Cola (Alternative 1)	Discontinue Royal Cola (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank 41f1c0f85017f9d_1	$fill in the blank 41f1c0f85017f9d_2	$fill in the blank 41f1c0f85017f9d_3
Costs:
Variable cost of goods sold	fill in the blank 41f1c0f85017f9d_4	fill in the blank 41f1c0f85017f9d_5	fill in the blank 41f1c0f85017f9d_6
Variable operating expenses	fill in the blank 41f1c0f85017f9d_7	fill in the blank 41f1c0f85017f9d_8	fill in the blank 41f1c0f85017f9d_9
Fixed costs	fill in the blank 41f1c0f85017f9d_10	fill in the blank 41f1c0f85017f9d_11	fill in the blank 41f1c0f85017f9d_12
Profit (loss)	$fill in the blank 41f1c0f85017f9d_13	$fill in the blank 41f1c0f85017f9d_14	$fill in the blank 41f1c0f85017f9d_15

Q4. eBook

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Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $601,500 and has $352,100 of accumulated depreciation to date, with a new machine that has a purchase price of $486,000. The old machine could be sold for $62,900. The annual variable production costs associated with the old machine are estimated to be $158,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $102,400 per year for 8 years.

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a. Prepare a differential analysis dated April 29 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Proceeds from sale of old machine	$fill in the blank de73a3051fe7f99_1	$fill in the blank de73a3051fe7f99_2	$fill in the blank de73a3051fe7f99_3
Costs:
Purchase price	fill in the blank de73a3051fe7f99_4	fill in the blank de73a3051fe7f99_5	fill in the blank de73a3051fe7f99_6
Variable productions costs (8 years)	fill in the blank de73a3051fe7f99_7	fill in the blank de73a3051fe7f99_8	fill in the blank de73a3051fe7f99_9
Income (Loss)	$fill in the blank de73a3051fe7f99_10	$fill in the blank de73a3051fe7f99_11	$fill in the blank de73a3051fe7f99_12

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Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.

Continue with the old machineReplace the old machine

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b. What is the sunk cost in this situation?

The sunk cost is $fill in the blank 3d058e091fedfe4_1.

Q5. Sell or Process Further

Timberland Lumber Company incurs a cost of $394 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $562 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $528 per hbf, which can be sold for $754 per hbf.

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Prepare a differential analysis dated August 9 on whether to Sell Rough Cut (Alternative 1) or Process Further into Finished Cut (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Sell Rough Cut (Alternative 1)	Process Further into Finished Cut (Alternative 2)	Differential Effects (Alternative 2)
Revenues, per 100 board ft.	$fill in the blank 5331110c9fabfd6_1	$fill in the blank 5331110c9fabfd6_2	$fill in the blank 5331110c9fabfd6_3
Costs, per 100 board ft.	fill in the blank 5331110c9fabfd6_4	fill in the blank 5331110c9fabfd6_5	fill in the blank 5331110c9fabfd6_6
Profit (loss), per 100 board ft.	$fill in the blank 5331110c9fabfd6_7	$fill in the blank 5331110c9fabfd6_8	$fill in the blank 5331110c9fabfd6_9

Q6. Decision on Accepting Additional Business

Homestead Jeans Co. has an annual plant capacity of 65,300 units, and current production is 44,500 units. Monthly fixed costs are $40,500, and variable costs are $25 per unit. The present selling price is $33 per unit. On November 12 of the current year, the company received an offer from Dawkins Company for 14,600 units of the product at $28 each. Dawkins Company will market the units in a foreign country under its own brand name. The additional business is not expected to affect the domestic selling price or quantity of sales of Homestead Jeans Co.

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a. Prepare a differential analysis dated November 12 on whether to Reject Order (Alternative 1) or Accept Order (Alternative 2). If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Reject Order (Alternative 1)	Accept Order (Alternative 2)	Differential Effects (Alternative 2)
Revenues	$fill in the blank ee5923fbe047fb0_1	$fill in the blank ee5923fbe047fb0_2	$fill in the blank ee5923fbe047fb0_3
Costs:
Variable manufacturing costs	fill in the blank ee5923fbe047fb0_4	fill in the blank ee5923fbe047fb0_5	fill in the blank ee5923fbe047fb0_6
Profit (loss)	$fill in the blank ee5923fbe047fb0_7	$fill in the blank ee5923fbe047fb0_8	$fill in the blank ee5923fbe047fb0_9

c. What is the minimum price per unit that would produce a positive contribution margin? Round your answer to two decimal places. $fill in the blank 16d08c064021f94_4