127. A company expects its three departments to yield the following income for next year:
Dept. O
Dept. K
Dept. W
Sales
$92,000
$15,000
$87,000
Expenses
Avoidable
73,000
1,000
36,000
Unavoidable
2,000
8,000
37,000
Total expenses
75,000
9,000
73,000
Net income (loss)
$17,000
$6,000
$14,000
Required: Compute the following independent calculations:a. The effect on total company income if Dept. O is eliminated.b. The effect on total company income if Dept. K is eliminated.c. The effect on total company income if Dept. W is eliminated.
128. A company expects its three departments to yield the following income for next year:
Dept. X
Dept. Y
Dept. Z
Sales
$94,000
$15,000
$70,000
Expenses
Avoidable
71,000
2,000
52,000
Unavoidable
4,000
7,000
20,000
Total expenses
75,000
9,000
72,000
Net income (loss)
$19,000
$6,000
$(2,000)
Required: Compute the following independent calculations:a. The effect on total company income if Dept. X is eliminated.b. The effect on total company income if Dept. Y is eliminated.c. The effect on total company income if Dept. Z is eliminated.
d. Should any of these departments be eliminated? Why of why not?
129. Doggy Day Park Inc. currently has a special tank used to provide exercise hydro therapy for the dogs. The current book value of the tank is $25,000 and they could sell it for $12,000 if they wanted to do so. Doggy is evaluating a new tank system that will provide additional therapy capability. The new tank will cost $55,000 and will save $7,500 per year in operating costs. The new tank system is expected to last six years.
Required:
a. Using incremental analysis, should they buy the new tank? Show calculations to support your answer.
b. Will the answer to (a) change if they can only sell the old tank for $5,000? Why or why not?
130. A local learning center is considering replacing the computers in its facility with thin client technology, thereby eliminating the need for individual computers at each station in the lab. The cost to purchase and install this new technology is $450,000 and it is projected to last for six years. The existing computers have a book value of $70,000 and a market value of $18,000 if they were to be sold. They expect to save a fair amount of money in maintenance costs and software upgrades if they go to the new technology.
Required:
a. What would the annual savings have to be in order to warrant the replacement of the existing computers with the thin client technology?
b. What would the annual savings have to be in order to warrant the replacement of the existing computers with the thin client technology if the existing computers have no current market value?
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