$1$

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WEEK $12$ In$-$Class ASSIGNMENT

ACC$2214$

QUESTION #$1$

Grey Company wants to replace an old machine with a new machine, given the information below:

NEW MACHINE

List price $$110,000$

Annual variable expense $$100,000$

Expected life in years $5$

OLD MACHINE

Remaining book value $$60,000$

Disposal value $$7,000$

Annual variable expense $$75,000$

Remaining life in years $5$

$1.$ Grey's sales are $$190,000$ per year

$2.$ Fixed expenses, other than depreciation, are $$40,000$ per year

Should the company purchase the new machine?

SOLUTION

For Five Years Keep Old Machine Purchase New

Machine Difference

Sales

Variable Expenses

Other Fixed Expenses

Depreciation $$ New

Depreciation $$ Old

Disposal of Old Machine

Total Net Income

Conclusion: $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

If the new machine is purchased, what is the net result?

$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

WEEK $12$ In$-$Class ASSIGNMENT

ACC$2214$