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vood Furniture Company is considering the purchase of two different machines, as describe ne A. A compacting machine has just come onto the market that
vood Furniture Company is considering the purchase of two different machines, as describe ne A. A compacting machine has just come onto the market that would permit Westwood F ist into various shelving products. At present the sawdust is disposed of as a waste product ble on the machine: = machine would cost $534,000 and would have a 10% salvage value at the end of its 13-yea aight-line depreciation and considers salvage value in computing depreciation deductions. = shelving products manufactured from use of the machine would generate revenues of $44 nufacturing costs would be 20% of sales. ed expenses associated with the new shelving products would be as follows (per year): adve 5,000; utilities, $4,500; insurance, $2,300. ine B. A second machine has come onto the market that would allow Westwood Furniture Co -ss that is now done largely by hand. The following information is available: = new sanding machine would cost $305,500 and would have no salvage value at the end o mpany would use straight-line depreciation on the new machine. veral old pieces of sanding equipment that are fully depreciated would be disposed of at a sc e new sanding machine would provide substantial annual savings in cash operating costs. It nual salary of $6,980 and $3,550 in annual maintenance costs. The current, hand-operated s mpany $99,000 per year in total. vood Furniture Company requires a simple rate of return of 15% on all equipment purchases. ase equipment unless the equipment has a payback period of four years or less. Required: 1. For machine A: a. Prepare an income statement showing the expected net income each year fr contribution format. (Round your answers to the nearest whole dollar amount. WESTWOOD FURNITURE COMPANY Income Statement Deduct: Fixed expenses Total fixed expenses 0 b. Compute the simple rate of return. (Round intermediate calculations to the nearest wh decimal place (i.e., 0.123 should be considered as 12.3%).) Simple rate of return % C. Compute the payback period. (Round intermediate calculations to the nearest whole d Payback period years 2. For machine B: a. Compute the simple rate of return. Simple rate of return % 2. For machine B: a. Compute the simple rate of return. Simple rate of return % b. Compute the payback period. Payback period years 3. According to the company's criteria, which machine, if either, s O Machine A O Machine B vood Furniture Company is considering the purchase of two different machines, as describe ne A. A compacting machine has just come onto the market that would permit Westwood F ist into various shelving products. At present the sawdust is disposed of as a waste product ble on the machine: = machine would cost $534,000 and would have a 10% salvage value at the end of its 13-yea aight-line depreciation and considers salvage value in computing depreciation deductions. = shelving products manufactured from use of the machine would generate revenues of $44 nufacturing costs would be 20% of sales. ed expenses associated with the new shelving products would be as follows (per year): adve 5,000; utilities, $4,500; insurance, $2,300. ine B. A second machine has come onto the market that would allow Westwood Furniture Co -ss that is now done largely by hand. The following information is available: = new sanding machine would cost $305,500 and would have no salvage value at the end o mpany would use straight-line depreciation on the new machine. veral old pieces of sanding equipment that are fully depreciated would be disposed of at a sc e new sanding machine would provide substantial annual savings in cash operating costs. It nual salary of $6,980 and $3,550 in annual maintenance costs. The current, hand-operated s mpany $99,000 per year in total. vood Furniture Company requires a simple rate of return of 15% on all equipment purchases. ase equipment unless the equipment has a payback period of four years or less. Required: 1. For machine A: a. Prepare an income statement showing the expected net income each year fr contribution format. (Round your answers to the nearest whole dollar amount. WESTWOOD FURNITURE COMPANY Income Statement Deduct: Fixed expenses Total fixed expenses 0 b. Compute the simple rate of return. (Round intermediate calculations to the nearest wh decimal place (i.e., 0.123 should be considered as 12.3%).) Simple rate of return % C. Compute the payback period. (Round intermediate calculations to the nearest whole d Payback period years 2. For machine B: a. Compute the simple rate of return. Simple rate of return % 2. For machine B: a. Compute the simple rate of return. Simple rate of return % b. Compute the payback period. Payback period years 3. According to the company's criteria, which machine, if either, s O Machine A O Machine B
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