Subway restaurants introduced freshly baked bread in 1983, a practice that made it stand out from other fast-food chains and helped build its reputation for made-to-order freshness. Since then Subway franchisees have introduced many types of gourmet seasoned breads-such as hearty Italian or Monterey cheddar-according to a schedule determined by headquarters.
Stan was one month into the "limited-time promotion" for the chain's new roasted garlic seasoned bread when his bake oven started faltering. "The temperature controls just don't seem quite right," said his employee and "sandwich artist," Rashid. "It's taking incrementally longer to bake the bread."
"This couldn't happen at a worse time," moaned Stan. "We're baking enough roasted garlic bread to keep a whole town of vampires away, but if we don't get it out of the oven fast enough, we'll keep our customers away!"
That very day Stan called his field consultant, Mariah, to discuss what to do about his bake oven. Mariah reminded Stan that his oven trouble illustrated the flip side of buying an existing store from a retired franchisee - having to repair or replace worn or old equipment. After receiving a rather expensive repair estimate and considering the age of the oven, Stan ultimately decided it would make sense for him to purchase a new one. Mariah concurred, "At the rate your sales are going, Stan, you're going to need that roomier new model."(.......)
How do you think Lila got the information on the useful life of Stan's bake oven and the estimate for its residual value? Why do you think she gets her information from this particular source? If Stan uses a straight-line method of depreciation and Stan's bake oven has a residual value of $1,000, how much depreciation will he account for each year and what would the adjustment be for each month?