shrtes cemponent at a cost of $7.75. 15. What is the appropriate measure of a pr
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shrtes cemponent at a cost of $7.75. 15. What is the appropriate measure of a producrs a 2615 s s sajipiy the same component for .Tr,, inurnsta.oes ls it reasonable to value when a firm is operating under bottlenecks? Obj 1 E 12-1 Lease or sell decision Yamada Industries is considering selling excess machinery with a Coriginal cost of $600,000 less accumulated depreciation of $380,000) for $200,000, less a 6% brokerage com for five years, after which it is expected to have no residual value. During the period of the lease, Yamada Industries' costs of repairs, insurance, and property tax expenses are expected to be $71,000. book value of $220,000 mission. Alternatively, the machinery can be leased for a total of $290,000 a. Differential revenue from lease, $90,000 a. Prepare a differential analysis report for the lease or sell decision. b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. Note: The spreadsheet icon indicates an Excel template is available on the student companion site.Explanation / Answer
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1 If Sold If Leased out Differential Analysis Revenue 200000 290000 90000 Less: Cost Brokerage 6% 12000 0 -12000 Repair etc 0 71000 71000 Net Income 188000 219000 31000 Since leasing is giving additional income of 31000, should be leased out. 2 if continuted if discontinued Differential Analysis Sale 4000000 0 4000000 Less: Variable Cost of goods sold 60% 1905000 0 1905000 Less: Variable Operating Expense 70% 770000 0 770000 Income before Fixed Cost 1325000 0 1325000 Less: Fixed Cost COGS 1270000 1270000 0 Operating Expense 330000 330000 0 Net Income/(Loss) -275000 -1600000 1325000 Since net income is generated 1325000, hence should continue the product.Related Questions
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