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Ch 24 Problem 4 Differential Analysis 30% Choose three of the following differential analysis questions. I will only look at three solutions - if you attempt more than three. You must clearly mark which ones you want me to grade. CHOICE #1/4 LEASE OR SELL Grey Company owns a machine with a cost of $320,000 and accumulated depreciation of$60,000 that can be sold for $250,000, less a 5% sales commission. Alternatively, the machine can be leased by Grey Company for three years for a total of $268,000, at the end of which there is not residual value. In addition, repair, insurance, and property tax that would be incurred by Grey Company on the machine would total $24,000 for the three years. a) Prepare a differential analysis report on the proposal to lease or sell the machine. b) Would it be advisable to sell or lease the machine? Why or why not? CHOICE #2/4 SELL OR PROCESS FURTHER Golden Roast Coffee Company produces Columbian coffee in batches of 7,700 pounds. The standard quantity of materials required in the process is 7,700 pounds, which cost $5 per pound. Columbian coffee can be sold without further processing for $8.90 per pound. Columbian coffee can also be processed further to yield Decaf Columbian, which can be sold for $11.60 per pound. The processing into Decaf Columbian requires additional processing costs of $18,326 per batch. The additional processing will also cause a 6% loss of product due to evaporation. a. Prepare a differential analysis for the decision to sell or process further. b. Should Golden Roast sell Columbian coffee or process further and sell Decaf Columbian? Why or why not? CHOICE #3/4 DISCONTINUE PRODUCT Product 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 of $12,250. This net loss resulted from sales of $260.000, 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 is retained, the revenue, costs, and expenses are not expected to change significantly from those of the current vear. However, because of the net loss, management is considering the elimination of the unprofitable endeavor. 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. Should management discontinue the product? Why or why not