Ch07 adj Werner Jones Mgt Acctg PP97 2003

There is a cancelable maintenance there contract

Info iconThis preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: Information • Cost of operating equipment is one Cost operator at $18,000 per year. • There is a cancelable maintenance There contract which costs $1,000/year. • A summary of the cost and benefit of summary each system can now be made. ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 12 LO4 Replacement Cost Summary Old System Start-up: Cost of system Operating: Annual depreciation Total depreciation Annual labor cost Total labor cost Annual maintenance cost Total maintenance cost Shutdown: Residual value Current sale price New System $ 35,500 $76,000 $ 7,000 35,000 36,000 180,000 1,000 5,000 $15,000 75,000 18,000 90,000 1,000 5,000 $ 500 10,000 $ 1,000 ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 13 LO4 Relevant Cost and Benefit Relevant of Each Alternative Relevant Total labor cost Residual value Current sale price $180,000 $ 500 $ 10,000 Irrelevant Cost of system Depreciation Maintenance cost $ 35,500 $ 35,000 $ 5,000 ©2009 Michael Werner and Kumen Jones, Introduction to Management Accounting, 3e Werner/Jones 7 ­ 14 LO4 Relevant Cost and Benefit Relevant of Each Alternative • The $35,500 cost of the old...
View Full Document

This note was uploaded on 03/16/2014 for the course ACC 212 taught by Professor Quintanna during the Spring '08 term at University of Miami.

Ask a homework question - tutors are online