Quik Press Inc. offers one day dry cleaning. at the beginning of 2015, th compan
ID: 2540171 • Letter: Q
Question
Quik Press Inc. offers one day dry cleaning. at the beginning of 2015, th company purchased a mechanized pressing machine. the owner of the company, Jill Jabowski, recently retured from an industry equipment exhibition where you saw a computerized pressing machine demonstrated. she was impressed with the machines speed, efficiency, and quality of output. upon retuning from the exhibition, she asked her purchasing agent to cleect price and operating cost data on the ew pressing machine. in addition, she asked the company's accountant to provide her with cost data on the company's pressing machine. this information is presented below:
annual oeprating expenses
other than depreciation:
annual revenues are 200,00, and selling and administrative expenses are 24,000, regardless of which pressing machine is used. if it replaces the old machine now, at the beginning of 2016, Quik Press will be able to sell it for 10,000
a) determine any gain or loss if the old pressing machine is replaced (already have answer)
b) prepare a five year summarized income statement for each of the following assumptions:
1) the old machine is kept
2) the old machine is replaced
c) using incremental analysis, determine whther the company should replace the old pressing machine
old pressing machine new pressing machine purchase price 120,000 150,000 estimated salvage value 0 0 estimated useful life 6 years 5 years depreciation method straight-line straight-lineannual oeprating expenses
other than depreciation:
variable 30,000 10,000 fixed 20,000 7000Explanation / Answer
B.1
the old machine is kept-
2
the old machine is replaced
C
Yes, comapny should replace the machine as it will save total money of 25,000.
All amount is in $
Income Statement All 5 Year Revenue 20,000 Expenses Variable exp. 30,000 Fixed exp. 20,000 Depreciation 20,000 Sellinga and administrative expenses 24,000 94,000 Profit/Loss (74,000)Related Questions
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