Question :
151. Carillion Company considering the disposal of equipment that no longer : 1239631
151. Carillion Company is considering the disposal of equipment that is no longer needed for operations. The equipment originally cost $600,000 and accumulated depreciation to date totals $460,000. An offer has been received to lease the machine for its remaining useful life for a total of $310,000, after which the equipment will have no salvage value. The repair, insurance, and property tax expenses that would be incurred by Carillion Company on the machine during the period of the lease are estimated at $75,800. Alternatively, the equipment can be sold through a broker for $230,000 less a 10% commission.Prepare a differential analysis report, dated June 15 of the current year, on whether the equipment should be leased or sold.
152. Product J is one of the many products manufactured and sold by Oceanside Company. An income statement by product line for the past year indicated a net loss for Product J of $12,250. This net loss resulted from sales of $275,000, cost of goods sold of $186,500, and operating expenses of $85,750. It is estimated that 30% of the cost of goods sold represents fixed factory overhead costs and that 40% of the operating expense is fixed. If Product J is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current year. Because of the large number of products manufactured, the total fixed costs and expenses are not expected to decline significantly if Product J is discontinued.Prepare a differential analysis report, dated February 8 of the current year, on the proposal to discontinue Product J.
153. Snipe Company has been purchasing a component, Part Q, for $19.20 a unit. Snipe is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by the absorption costing method, is estimated as follows:
Direct materials
$11.50
Direct labor
4.50
Variable factory overhead
1.12
Fixed factory overhead
3.15
Total
$20.27
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q.
154. MZE Manufacturing Company has a normal plant capacity of 37,500 units per month. Because of an extra large quantity of inventory on hand, it expects to produce only 30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3 per unit at normal plant capacity) and variable costs and expenses are $8.25 per unit. The present selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional units at $9.90 per unit to an exporter who plans to market the product under its own brand name in a foreign market. The additional business is therefore not expected to affect the regular selling price or quantity of sales of MZE Manufacturing Company.Prepare a differential analysis report, dated April 21 of the current year, on the proposal to sell at the special price.
155. Due to Medicare reimbursement cuts, Loving Home Care is considering shutting down its Certified Nursing Assistant (CNA) Division. Fixed costs will have to be transferred to the Nursing Division if the CNA division is discontinued. Based on the following income statement make a recommendation to the president regarding this decision.
Loving Home Care
Condensed Income Statement
For the Year Ended December 31, 20–
Nursing
CNA’s
Total
Revenues
$3,500,000
$1,000,000
$4,500,000
Variable Costs
2,000,000
700,000
2,700,000
Fixed Costs
400,000
400,000
800,000
Net Income from operations
$1,100,000
($100,000)
$ 1,000,000
