What is the sunk cost in this situation

Assignment Help Managerial Accounting
Reference no: EM132767667

Problem - Machine replacement decision - A company is considering replacing an old piece of machinery, which cost $400,000 and has $175,000 of accumulated depreciation to date, with a new machine that has a purchase price of $550,000. The old machine could be sold for $250,000. The annual variable production costs associated with the old machine are estimated to be $72,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $24,000 per year for eight years.

Required -

a. Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.

b. What is the sunk cost in this situation?

Reference no: EM132767667

Questions Cloud

Determine the relative product profitabilities : The variable conversion cost is $10 per process hour. The fixed cost is $400,000. Provide an analysis to determine the relative product profitabilities
Critically evaluate the SH data warehouse : Develop critical awareness of the responsibilities of database developer with respect to professional, legal, security and ethical issues individually
What is the total estimated operating income of warehouse : Differential analysis involving opportunity costs - If the proposal is accepted, what is the total estimated operating income of the warehouse for the 14 years
Determine the unit contribution margin for each product : The furnace operation is part of the total process for each of these three products. Determine the unit contribution margin for each product
What is the sunk cost in this situation : The annual variable production costs for the new machine are estimated to be $24,000 per year for eight years. What is the sunk cost in this situation
Problem - Segment Analysis for a Service Company : Problem - Segment Analysis for a Service Company - How does a brokerage company like Schwab define the Investor Services and Advisor Services segments
Obtain the load flow solution of the system : Raphson method obtain the load flow solution of the system considering a tolerance value of l0' or at least two iterations. The reactances are given in per unit
Problem - Differential Analysis for a Lease or Sell Decision : Problem - Differential Analysis for a Lease or Sell Decision - would it be advisable to lease or sell the machinery? Explain
Determine the most profitable product : Product K requires five furnace hours, while Product L requires four furnace hours. Determine the most profitable product

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Determine the required sales to meet target operating income

Determine the required sales to meet the target operating income during 2020. Jagswear Inc. earned operating income of $81,000 during 2020.

  Which costs are not relevant to the decision

Which, if any, of the above costs are not relevant to this decision? Why? The Hyatt Company is trying to decide whether it should purchase new equipment

  Make a straight-line amortization table for these bonds

The annual contract rate is 8%, and interest is paid semiannually on June 30 and December 31. Make a straight-line amortization table for these bonds

  What would be the dollar amount of change in net income

What would be the dollar amount of a change in net income if the straight-line method was hypothetically used instead of the double declining method

  How to calculate total cost of goods manufactured

How to Calculate total cost of goods manufactured? Calculate prime costs for both book and brochure and total monthly prime cost.

  Prepare the cash receipts budget for the second quarter

Prepare the cash receipts budget for the second quarter. Prepare the cash payments budget for the second quarter. Prepare the cash budget for the second quarter

  Required journal entry to record transfer of cost of good

Required journal entry to record the transfer of the cost of goods completed and transferred out during May. Calculation of equivalent units.

  Determine a fuel surcharge to add to its customers

determine a fuel surcharge to add to its customers' bills based on the number of miles driven to each area - selling an equal number of high-contribution margin

  Determine the dollar amount and label

Determine the dollar amount, and label (Favorable or Unfavorable).Mopar Company uses a master budget and subsequent variance analysis.

  Discuss the effectiveness of management accountancy as tool

In a digital world, the focus of the finance function is shifting from being based on costs to being based on organisational value.

  Solve weighted average cost of capital for royta ltd

The company's beta is 1.4. Assuming that the company uses the CAPM to calculate its cost of equity. Calculate its weighted average cost of capital.

  What would a full flexible budget report for august

What would a full flexible budget report for August 2019 showing actual performance against budget, assuming that the company used 3,000 machine

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd