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Sell or Process Further Bunyon Lumber Company incurs a cost of $372 per hundred board feet (hbf) in processing certain rough-cut lumber, which it sells
Sell or Process Further Bunyon Lumber Company incurs a cost of $372 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $546 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $521 per hbf, which can be sold for $742 per hbf. Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Rough-Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2) August 9 Process Differential Further into Effect Rough-Cut Finished Cut on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues, per 100 board ft. Costs, per 100 board ft. Sell Income (Loss), per 100 board ft. Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $602,900 and has $349,700 of accumulated depreciation to date, with a new machine that has a purchase price of $486,900. The old machine could be sold for $64,400. The annual variable production costs associated with the old machine are estimated to be $157,000 per year for eight years. The annual variable production costs for the new machine are estimated to be $101,100 per year for eight years. a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Continue Replace Differential with Old Old Effect Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Variable productions costs (8 years) Income (Loss) Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. b. What is the sunk cost in this situation? The sunk cost is $
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