Multiple Choice QuestionA company purchased manufacturing equipment 5 years ago for $50,000. Book value is currently $5,000 and the remaining useful life is 3 years. The equipment incurs variable manufacturing costs of $30,000. The company is considering replacing the equipment. The new equipment will cost $75,000, have a useful life of 3 years, and is more efficient and, therefore, only costs $10,000 in variable manufacturing costs to operate each year. The vendor is willing to accept the old equipment with a selling price of $20,000. The company should:Multiple choice question.keep the old equipment because the total net increase in income will be $5,000replace the old equipment because the total net increase in income will be $5,000replace the old equipment because the total net decrease in income will be $5,000keep the old equipment because replacing it will decrease income by $5,000 if they purchase the new equipment

When making keep or replace decisions, management should consider the: (Check all that apply.)Multiple select question.sale of the existing equipmentoriginal cost of the existing equipmentvariable manufacturing cost of the existing equipmentvariable manufacturing cost of the new equipmentbook value of the existing equipment

Multiple Choice QuestionA company currently makes a component used in production. The per unit costs incurred to make the component include: Direct materials: $5; Direct labor: $2; Overhead: $4; Total cost: $11. Twenty-five percent of the overhead costs are considered incremental. The company can purchase the component from another source for $10. The company should do which of the following?Multiple choice question.The company can be indifferent because incremental costs are $10 and the purchase price is $10.The company should buy the components to save $1 per unit.The company should make the components because incremental costs are $2 less than the purchase price.The company should buy the components to save $2 per unit.

Multiple Choice QuestionA manufacturing company currently produces 1,000 units of a product at a cost of $5,000. The units sell for $7,000. Alternatively, the company can process the units further to produce a refined product that will sell for $10,000. The additional processing will cost $4,000. The company should:Multiple choice question.sell as is because processing further will reduce income by $6,000process further because net incremental income will be $1,000process further because net incremental income will be $6,000sell as is because the incremental income of selling as is versus processing further will increase income by $1,000

Assume that an entity acquired 250 items of inventory at a cost of £20 each and sold 150 of the items for £25 each when the replacement cost was £22. Assume that the replacement cost of the remaining 50 units at year end was £24. Under Edwards and Bell the operating profit is: Assume that an entity acquired 250 items of inventory at a cost of £20 each and sold 150 of the items for £25 each when the replacement cost was £22. Assume that the replacement cost of the remaining 50 units at year end was £24. Under Edwards and Bell the operating profit is: 450 750 200 300

Multiple Choice QuestionA company receives a special order of 10,000 units of product. The potential customer is willing to pay $0.75 per unit. Current sales are $90,000 and current costs are $75,000 for 90,000 units. If the order is accepted, costs will increase to $82,000. If the company has the capacity to accept the order without affecting current sales, the company should:Multiple choice question.reject the order, because income will decrease by $500reject the order, because the sales price of $0.75 per unit is less than current costs of $0.83 per unitaccept the order, because income will increase by $500accept the order, because sales will increase by $7,500