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Financial and Managerial Accounting-PROBLEM 24-2A Quebec Printing Company is considering replacing a machine-ANSWER KEY (INSTANT DOWNLOAD)

Financial and Managerial Accounting-PROBLEM 24-2A  Quebec Printing Company is considering replacing a machine-ANSWER KEY (INSTANT DOWNLOAD)
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Solution Guide / Answer Key:

 

Financial and Managerial Accounting by WARREN

Chapter 24 Differential Analysis and Product Pricing

PROBLEM 24-2A Differential analysis report for machine replacement proposal

 

Quebec Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:

Old Machine:

Cost of machine, 10-year life   360,000

Annual depreciation (straight-line)     36,000

Annual manufacturing costs, excluding depreciation   325,000

Annual nonmanufacturing operating expenses   215,000

Annual revenue   740,000

Current estimated selling price of machine   210,000

New Machine:

Cost of machine, 6-year life   410,000

Annual depreciation (straight-line)     68,333

Annual manufacturing costs, excluding depreciation   284,000

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

1.  Prepare a differential analysis report as of October 13, 2008 of the current year, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the total differential income that would result over the 6-year period if the new machine is acquired.

2.  List other factors that should be considered before a final decision is reached.     

 

FILE: MS WORD

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