Requirement 3. Assume that the capital expenditures to replace and upgrade the production equipment are as...

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Requirement 3. Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise but that the production and sales quantity is not known. For what production and sales quantity would Davanit (a) upgrade the equipment or (b) replace the equipment? (Round your answer to the nearest whole number.) Davanit would want to upgrade if the production and sales quantity was less than 12222 units for the three years. Requirement 4. Assume that all data are as given in the original exercise. Dan Doria is Davanit's manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Doria choose? Explain. (Round your answers to the nearest whole dollar. Do not leave any cells blank.) Use the table below to compute the operating income for each of the options. Revenues Cash operating costs Depreciation Loss on disposal of old equipment Total costs Operating Income $ Upgrade 3,097,500 $ Replace 3,097,500 796,500 531,000 1,306,667 1,333,333 470,000 2,103,167 2,334,333 $ 994,333 $ 763,167 First-year operating income is higher by $ 231167 under the upgrade alternative, and Dan Doria, with his one-year horizon and operating income-based bonus, will choose the upgrade alternative, even though, as seen in requirement 1, the replace alternative is better in the long run for Davanit. This exercise illustrates the possible conflict between the decision model and the performance evaluation model. Requirement 1. Should Davanit upgrade its production line or replace it? Show your calculations. (Only complete the necessary answer boxes. Leave unused cells blank. Use parentheses or a minus sign for a negative cost.) Over 3 years Upgrade Cash operating costs Current disposal price One time capital costs, written off periodically as depreciation Total relevant costs Replace Difference in favour of Replace $ 2,389,500 $ 1,593,000 $ 796,500 2,900,000 (550,000) 4,000,000 550,000 (1,100,000) $ 5,289,500 $ 5,043,000 246,500 Davanit Company should replace the equipment. When comparing relevant costs between the choices, replacing the equipment is lower than the cost to upgrade. Requirement 3. Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise but that the production and sales quantity is not known. For what production and sales quantity would Davanit (a) upgrade the equipment or (b) replace the equipment? (Round your answer to the nearest whole number.) Davanit would want to upgrade if the production and sales quantity was less than 12222 units for the three years. Requirement 4. Assume that all data are as given in the original exercise. Dan Doria is Davanit's manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Doria choose? Explain. (Round your answers to the nearest whole dollar. Do not leave any cells blank.) Use the table below to compute the operating income for each of the options. Revenues Cash operating costs Depreciation Loss on disposal of old equipment Total costs Operating Income $ Upgrade 3,097,500 $ Replace 3,097,500 796,500 531,000 1,306,667 1,333,333 470,000 2,103,167 2,334,333 $ 994,333 $ 763,167 First-year operating income is higher by $ 231167 under the upgrade alternative, and Dan Doria, with his one-year horizon and operating income-based bonus, will choose the upgrade alternative, even though, as seen in requirement 1, the replace alternative is better in the long run for Davanit. This exercise illustrates the possible conflict between the decision model and the performance evaluation model. Requirement 1. Should Davanit upgrade its production line or replace it? Show your calculations. (Only complete the necessary answer boxes. Leave unused cells blank. Use parentheses or a minus sign for a negative cost.) Over 3 years Upgrade Cash operating costs Current disposal price One time capital costs, written off periodically as depreciation Total relevant costs Replace Difference in favour of Replace $ 2,389,500 $ 1,593,000 $ 796,500 2,900,000 (550,000) 4,000,000 550,000 (1,100,000) $ 5,289,500 $ 5,043,000 246,500 Davanit Company should replace the equipment. When comparing relevant costs between the choices, replacing the equipment is lower than the cost to upgrade.