Wally Lewis is the manager of the engineering development division of Goldcoast Products. Lewis has just received
Fantastic news! We've Found the answer you've been seeking!
Question:
Wally Lewis is the manager of the engineering development division of Goldcoast Products. Lewis has just received a proposal signed by all 15 of his engineers to replace the workstations with networked personal computers (networked PCs). Lewis is not enthusiastic about the proposal.
Data on workstations and networked PCs are:
Workstations | Networked PCs | |
---|---|---|
Original cost | $300,000 | $135,000 |
Useful life | 5 years | 3 years |
Current age | 2 years | 0 years |
Remaining useful life | 3 years | 3 years |
Accumulated depreciation | $120,000 | Not acquired yet |
Current book value | $180,000 | Not acquired yet |
Current disposal value (in cash) | $95,000 | Not acquired yet |
Terminal disposal value (in cash 3 years from now) | $0 | $0 |
Annual computer-related cash operating costs | $40,000 | $10,000 |
Annual revenues | $1,000,000 | $1,000,000 |
Annual non-computer-related operating costs | $880,000 | $880,000 |
Lewis's annual bonus includes a component based on division operating income. He has a promotion possibility next year that would make him a group vice president of Goldcoast Products.
Why might Lewis be reluctant to purchase the networked PCs?
Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133392883
6th Canadian edition
Authors: Horngren, Srikant Datar, George Foster, Madhav Rajan, Christ
Posted Date: