analytics-for-managerial-decision-making

In the former case dillaway is up and running for

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Unformatted text preview: 2,000. in the former case, Dillaway is up and running for $24,000; in the later, Dillaway is up and running for $22,000 ($32,000 - $10,000). it seems clear that the better option is to sell the damaged truck and buy the one for sale on the internet. The logic implied by the preceding discussion is to focus on incremental items that differ between the alternatives. The same conclusion can be reached by a more comprehensive analysis of all costs and benefits. The following portrays one such analysis. This analysis also supports sale and replacement because the income and cash flow impacts are $2,000 better than with the repair option: ANALYSIS FOR SALE OF TRUCK ANALYSIS FOR REPAIR OF TRUCK Cost of damaged truck Accumulated depreciation on damaged truck Net book value of damaged truck Less: Insurance recovery Resulting reduced basis Sales price of damaged truck Less: Reduced basis (from above) Gain on sale of truck $ 32,000 Lifetime income effect: * Gain on sale of truck Future depreciation Net impact on income Cash flow impacts: Insurance recovery Sales price of damaged truck Purchase price of truck Net impact on cash $ 60,000 24,000 $ 36,000 30,000 $ 6,000 24,000 $ 30,000 Future depreciation (resulting basis) $ 10,000 6,000 $ 4,000 Future depreciation (purchase price/new truck) Cost of damaged truck Accumulated depreciation on damaged truck Net book value of damaged truck Less: Insurance recovery Resulting reduced basis Plus: Money to repair truck Resulting basis $ 60,000 24,000 $ 36,000 30,000 $ 6,000 $ 30,000 Lifetime income effect: Gain on sale of truck Future depreciation Net impact on income $ 4,000 (32,000) $ (28,000) Cash flow impacts: Insurance recovery Repair costs $ 30,000 10,000 (32,000) $ 8,000 Net impact on cash $ (30,000) $ (30,000) $ 30,000 (24,000) $ 6,000 Download free ebooks at bookboon.com 8 Cost Characteristics and Decision-Making Ramifications Analytics for Managerial Decision Making Your head is likely swimming in information based on this comprehensive analysis. Although it is m...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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