EX 24-2 Differential analysis for lease or buy decision. Norton Corporation is c

Question

EX 24-2 Differential analysis for lease or buy decision.

Norton Corporation is considering new equipment. The equipment can be purchased form an overseas supplier for $4,600. The freight and installation cost for the equipment are $590. If purchased annual repairs and maintenance are estimated to be $620 per year over from a domestic supplier for $1,800 per year for four years, with no additional costs. Prepare a differential analysis dated August 4, 2014, to determine whether Norton should lease (alternate 1) or purchase (alternate 2) the equipment.   

Explanation / Answer

Differential Analysis on August 4, 2014,

lease (Alt 1 ) or purchase (Alt 2)

lease (Alt 1 ) purchase (Alt 2) Differential effect on total cost

cost of equipment - $4600 ($4600) alt 1

   freight and installation cost - $590 ($590) alt 1

  Annual repair and maintenance   $7200   $2480 $4720 alt 2

$7200 $7670 ($470) alt 1

Therefore , Norton Corporation sholud take the equipment on lease to save the extra total cost of $470.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.