Assuming fixed costs are unaffected by the decision

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Reference no: EM13823429

PART A:

Errod Company owns a machine with a cost of $305,000 and accumulated depreciation of $45,000 that can be sold for $231,000, less a 5% sales commission. Alternatively, the machine can be leased by Jerrod Company for three years for a total of $243,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Jerrod Company on the machine would total $16,900 over the three years.

Prepare a differential analysis on January 12, 2014, as to whether Jerrod Company should lease (Alternative 1) or sell (Alternative 2) the machine.

PART B:

Product S has revenue of $149,000, variable cost of goods sold of $88,500, variable selling expenses of $24,500, and fixed costs of $40,000, creating a loss from operations of $4,000.

Prepare a differential analysis as of September 12, 2014, to determine if Product S should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter zero "0".

PART C:

Product R is normally sold for $52 per unit. A special price of $39 is offered for the export market. The variable production cost is $31 per unit. An additional export tariff of 25% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order.

Prepare a differential analysis dated October 23, 2014, on whether to reject (Alternative 1) or accept (Alternative 2) the special order. Round your answers to two decimal places (e.g., 23.72, 25.00). If an amount is zero, enter zero "0".

Reference no: EM13823429

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