Acct306 Homework Ch11

Acct306 Homework Ch11 - CHAPTER 11 DECISION MAKING AND...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
11-1 CHAPTER 11 DECISION MAKING AND RELEVANT INFORMATION 11-42 Equipment replacement decisions and performance evaluation . 1. Operating income for the first year under the keep and replace alternatives are shown below: Denote the current direct manufacturing labor costs by $X and the current electricity costs by $Y. Year 1 Replace Keep Cost Difference by Replacing (1) (2) (3) = (1) – (2) Cash operating costs Direct manufacturing labor $X–$30,000 $ X –$30,000 Electricity $Y–$35,000 $ Y –$35,000 Depreciation ($180,000 ÷ 2; $60,000) $ 90,000 $ 60,000 +$30,000 Loss on disposal of old machine ($120,000 – $72,000; $0) $ 48,000 $ 0 +$48,000 Total costs $ X + $Y $X + $Y +$ 73,000 +$60,000 +$13,000 First-year costs are lower by $13,000 under the keep machine alternative, and Bob Moody, with his one-year horizon and operating income-based bonus, will choose to keep the machine. 1. Based on the analysis in the table below, George Manufacturing will be better off by $22,000 over two years if it replaces the current equipment. Over 2 Years Cash Outflow Comparing Relevant Costs of Replace Keep By Replacing Replace and Keep Alternatives (1) (2) (3) = (1) – (2)
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern