1 answer

The Dowling Company produces and sells 5,900 modular computer desks per year at a selling price...

Question:

The Dowling Company produces and sells 5,900 modular computer desks per year at a selling price of $480 each. Its current production​ equipment, purchased for $1,750,000 and with a​ five-year useful​ life, is only two years old. It has a terminal disposal value of​ $0 and is depreciated on a​ straight-line basis. The equipment has a current disposal price of $650,000. ​However, the emergence of a new molding technology has led Dowling to consider either upgrading or replacing the production equipment. The following table presents data for the two​ alternatives:

Upgrade

Replace

One-time equipment costs

$2,400,000

$3,900,000

Variable manufacturing cost per desk

$120

$60

Remaining useful life of equipment (years)

3

3

Terminal disposal value of equipment

$0

0

All equipment costs will continue to be depreciated on a​ straight-line basis.

For​ simplicity, ignore income taxes and the time value of money.

1. Should

DowlingDowling

upgrade its production line or replace​ it? Show your calculations. ​(Only complete the necessary answer​ boxes.)

Over 3 years

Difference

Upgrade

Replace

in favour of Replace

Cash operating costs

Current disposal price

One time capital costs, written off

periodically as depreciation

Total relevant costs


Answers

Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!
The Dowling Company
Workings
Calculation of Cash operating costs Upgrade Replace Note
Annual production            5,900.00            5,900.00 A
Variable manufacturing cost per desk               120.00                 60.00 B
Annual Variable manufacturing cost       708,000.00       354,000.00 C=A*B
Number of years                   3.00                   3.00 D
Cash operating costs of 3 years 2,124,000.00 1,062,000.00 E=C*D
Final Answer
Over 3 years Difference
Particulars Upgrade Replace in favor of Replace
Cash operating costs    2,124,000.00    1,062,000.00 (1,062,000.00) See E
Current disposal price                        -        (650,000.00)      (650,000.00)
One time capital costs, written off periodically as depreciation    2,400,000.00    3,900,000.00     1,500,000.00
Total relevant costs 4,524,000.00 4,312,000.00      (212,000.00)
There is savings of $ 212,000 if the equipment is replaced. So it should be replaced.
.

Similar Solved Questions

1 answer
Which expression can be substituted for x in the top equation of the system below to solve the system by substitution
which expression can be substituted for x in the top equation of the system below to solve the system by substitution? 2x+10y=1 x-4y=-4...
1 answer
Player 2 9 1-9 Question 4: (15pt total] Consider the following game: X Y Player 1...
Player 2 9 1-9 Question 4: (15pt total] Consider the following game: X Y Player 1 P A 1,3 2,4 1-PB 0,2 8,0 Suppose Player 1 plays A with probability p, and Player 2 plays X with probability q. Let E (-) and E2(-) be the expected payoff functions. 4)a) [8pt total] Calculate the following: 4)a)i) (2pt...
1 answer
Four Guys Company has in its inventory 5,000 paired at a cost of $45,000 and sold...
Four Guys Company has in its inventory 5,000 paired at a cost of $45,000 and sold for $78,000. What is the opportunity cost of selling the televisions in their present condition? O A $123,000 O B. $79,000 OC. $33,000 OD. $87,000...
1 answer
Please help me with both questions. I don't have any more questions left and its really...
Please help me with both questions. I don't have any more questions left and its really urgent. Please! 5. + -/1 points SerCP9 5.P.053. 0/6 Submissions Used My Notes + Ask Your Teacher The electric motor of a model train accelerates the train from rest to 0.640 m/s in 31.0 ms. The total mass of ...
1 answer
To what degree would Rent the Runway be a different company today if Hyman and Fleiss...
To what degree would Rent the Runway be a different company today if Hyman and Fleiss had not conducted a feasibility analysis? Do you think the business would be as successful as is currently the case? Run The Runway - Entrepreneur...
1 answer
At a given instant the bottom A of the ladder has an acceleration a A =...
At a given instant the bottom A of the ladder has an acceleration a A = 3.8 ft/s and velocity va = 6.4 ft/s, both acting to the left. (Figure 1) Part A Determine the acceleration of the top of the ladder, B. Express your answer to three significant figures and include the appropriate units. UA ab = ...
1 answer
4. a nurse is planning to discharge a client who has diabetes and a new prescription...
4. a nurse is planning to discharge a client who has diabetes and a new prescription of the following actions should the nurse plan to complete first? wno nas diabetes and a new prescription for insulin which Provide the client with a contact number for a diabetes education specialist Make a copy of...
1 answer
There is a lot of discrepancy when it comes to examining genitalia in the pediatric population....
There is a lot of discrepancy when it comes to examining genitalia in the pediatric population. What have you witnessed in your clinical setting regarding both male and females? For example, do they document the Tanner stages? What is recommended, and how do you think you will practice? At what age ...
1 answer
9 please. Nitrogen gas reacts with hydrogen gas to produce ammonia. N2(g) + 3H2(g) — 2NH3(g)...
9 please. Nitrogen gas reacts with hydrogen gas to produce ammonia. N2(g) + 3H2(g) — 2NH3(g) a. If you have 3.64 g of H, how many grams of NH3 can be produced? b. How many grams of H, are needed to react with 2.80 g of N? c. How many grams of NH; can be produced from 12.0 g of H? DO...
1 answer
17) 17. Which of the following is a primary trait of leadership? (5pts) Charisma Creativity and...
17) 17. Which of the following is a primary trait of leadership? (5pts) Charisma Creativity and originality Knowledge of business @ Self-confidence 18) 18. Which of the following is NOT a primary trait of leadership? Honesty and integrity Desire to lead Self-confidence Charisma 19) 19. Lis at best s...
1 answer
Cullumber Distribution Co. has determined its December 31, 2017 inventory on a LIFO basis at $989000....
Cullumber Distribution Co. has determined its December 31, 2017 inventory on a LIFO basis at $989000. Information pertaining to that inventory follows: Estimated selling price $1030000 Estimated cost of disposal 41000 Normal profit margin 121000 Current replacement cost 909000 C...
1 answer
Consider a particle in a 1-d well with potential V(x) =-U for-d < x < d,...
Consider a particle in a 1-d well with potential V(x) =-U for-d < x < d, and V(z) 0 elsewhere. We will use the variational wave function v(z) = A(b + r), t(x)-A(b-x), -b < r < 0, 0 < x < b, to show that a bound state exists for any U0. a) Normalize the wave function. Find the expec...
1 answer
Electric fields are vector quantities whose magnitudes are measured in units of volts/meter (V/m). Find the...
Electric fields are vector quantities whose magnitudes are measured in units of volts/meter (V/m). Find the resultant electric field when there are two fields, E1 and E2, where E1 is directed vertically upward and has magnitude 98 V/m and E2 is directed 44° to the left of E1 and has magnitude 13...
1 answer
Rank chemical formulas with respect to decreasing melting point 15) Rank the following substances in order...
rank chemical formulas with respect to decreasing melting point 15) Rank the following substances in order of decreasing melting point: Sodium chloride, (NaCl), Methanol (CH,OH), Methyl chloride (CH,CI), Methane (CH), and Quartz crystal. A) Quartz crystal > NaCl > CH CI >CH,OH >CH, B...
1 answer
Create a general journel entry using the following information: During January 2018, the following transactions occur:...
Create a general journel entry using the following information: During January 2018, the following transactions occur: January 2 Purchase rental space for one year in advance, $6,600 ($550/month). January 9 Purchase additional supplies on account, $3,700. January 13 Provide services to cu...
1 answer
My rour eacher 2 points SerPSES 2 P033 A truck on a straight road starts from...
My rour eacher 2 points SerPSES 2 P033 A truck on a straight road starts from rest, accelerating at 2.00 m/s2 until it reaches a speed of 12.0 m/s. Then the truck travels for 36.0 s stopping the truck in a uniform manner in an additional 5.00 ed until the brakes are applied, a) How long is the truck...
1 answer
Lucas Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has...
Lucas Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $60 per machine hour, while the Sanding Department uses a departmental overhead rate o...