Eclipse Construction Company is considering selling excessmachinery with a book value of $360,800 (original cost of $484,900less accumulated depreciation of $124,100) for $224,800, less a 6%brokerage commission. Alternatively, the machinery can be leasedfor a total of $220,090 for five years, after which it is expectedto have no residual value. During the period of the lease, EclipseConstruction Companyâs costs of repairs, insurance, and propertytax expenses are expected to be $16,678.
Required: A. Prepare a differentialanalysis, dated April 16 to determine whether Eclipse should lease(Alternative 1) or sell (Alternative 2) the machinery. Refer to theAmount Descriptions list provided for the exact wording of theanswer choices for text entries. For those boxes in which you mustenter subtracted or negative numbers use a minus sign. If there isno amount or an amount is zero, enter â0â. A colon (:) willautomatically appear if required. B. On the basis of the data presented, would it be advisable tolease or sell the machinery? Explain.
Amount Descriptions
Costsâ
Revenues
A. Prepare a differential analysis, dated April 16 to determinewhether Eclipse should lease (Alternative 1) or sell (Alternative2) the machinery. Refer to the Amount Descriptions list providedfor the exact wording of the answer choices for text entries. Forthose boxes in which you must enter subtracted or negative numbersuse a minus sign. If there is no amount or an amount is zero, enterâ0â. A colon (:) will automatically appear if required.
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Score: 0/51
Differential Analysis
Lease Machinery (Alternative 1) or Sell Machinery (Alternative2)
April 16
1
Lease Machinery
Sell Machinery
Differential Effect on Income
2
(Alternative 1)
(Alternative 2)
(Alternative 2)
3
4
5
Eclipse Construction Company is considering selling excessmachinery with a book value of $360,800 (original cost of $484,900less accumulated depreciation of $124,100) for $224,800, less a 6%brokerage commission. Alternatively, the machinery can be leasedfor a total of $220,090 for five years, after which it is expectedto have no residual value. During the period of the lease, EclipseConstruction Companyâs costs of repairs, insurance, and propertytax expenses are expected to be $16,678.
| Required: | ||||||||||||||||||||||||||||||
| A. | Prepare a differentialanalysis, dated April 16 to determine whether Eclipse should lease(Alternative 1) or sell (Alternative 2) the machinery. Refer to theAmount Descriptions list provided for the exact wording of theanswer choices for text entries. For those boxes in which you mustenter subtracted or negative numbers use a minus sign. If there isno amount or an amount is zero, enter â0â. A colon (:) willautomatically appear if required. | |||||||||||||||||||||||||||||
| B. | On the basis of the data presented, would it be advisable tolease or sell the machinery? Explain. Amount Descriptions Costsâ
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Related questions
The condensed product-line income statement for Dish Nâ DatCompany for the month of March is as follows:
Dish Nâ Dat Company |
Product-Line Income Statement |
For the Month Ended March 31, 2016 |
1 | Bowls | Plates | Cups | |
2 | Sales | $70,960.00 | $105,450.00 | $31,760.00 |
3 | Cost of goods sold | 32,990.00 | 42,680.00 | 16,710.00 |
4 | Gross profit | $37,970.00 | $62,770.00 | $15,050.00 |
5 | Selling and administrative expenses | 27,350.00 | 42,530.00 | 16,670.00 |
6 | Income from operations | $10,620.00 | $20,240.00 | $(1,620.00) |
Fixed costs are 30% of the cost of goods sold and 50% of theselling and administrative expenses. Dish Nâ Dat assumes that fixedcosts would not be materially affected if the Cups line werediscontinued.
| Required: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| A. | Prepare a differential analysisdated March 31, 2016, to determine if Cups should be continued(Alternative 1) or discontinued (Alternative 2). Refer to the listsof Labels and Amount Descriptions for the exact wording of theanswer choices for text entries. For those boxes in which you mustenter subtracted or negative numbers use a minus sign. If there isno amount or an amount is zero, enter "0". A colon (:) willautomatically appear if required. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| B. | Should the Cups line be retained? Explain
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The management of Dominican Sugar Company is considering whether to process further raw sugar into refined sugar. Refined sugar can be sold for $2.23 per pound, and raw sugar can be sold without further processing for $1.43 per pound. Raw sugar is produced in batches of 42,500 pounds by processing 100,000 pounds of sugar cane, which costs $0.36 per pound of cane. Refined sugar will require additional processing costs of $0.49 per pound of raw sugar, and 1.25 pounds of raw sugar will produce 1 pound of refined sugar.
| Required: | |
| 1. | Prepare a differential analysis as of March 24 to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2). Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter â0â. A colon (:) will automatically appear if required. |
| 2. | Briefly report your recommendations. |
| Amount Descriptions | ||||||||||||||||||||||||||||
| Costs, per batch | ||||||||||||||||||||||||||||
| Income (Loss), per batch | ||||||||||||||||||||||||||||
| Revenues, per batch 1. Prepare a differential analysis as of March 24 to determine whether to sell raw sugar (Alternative 1) or process further into refined sugar (Alternative 2). Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter â0â. A colon (:) will automatically appear if required.
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