Astro Company owns equipment with a cost of $367,300 and accumulated depreciation of $56,100 that can be sold for $273,800, less a 3% sales commission. Alternatively, Astro Company can lease the equipment for 3 years for a total of $285,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $15,000 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) October 29 Lease Sell Line Item Description Equipment Equipment Revenues Costs Profit (Loss) 4000 (Alternative 1) (Alternative 2) (Alternative 2) 245,800✔ -12.000 ✓ Differential Effects 273,800✔

Astro Company owns equipment with a cost of $367,300 and accumulated depreciation of $56,100 that can be sold for $273,800, less a 3% sales commission. Alternatively, Astro Company can lease the equipment for 3 years for a total of $285,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $15,000 over the 3-year lease. a. Prepare a differential analysis on October 29 as to whether Astro Company should lease (Alternative 1) or sell (Alternative 2) the equipment. If required, use a minus sign to indicate a loss Differential Analysis Lease Equipment (Alt. 1) or Sell Equipment (Alt. 2) October 29 Lease Sell Line Item Description Equipment Equipment Revenues Costs Profit (Loss) 4000 (Alternative 1) (Alternative 2) (Alternative 2) 245,800✔ -12.000 ✓ Differential Effects 273,800✔

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 1BE: Lease or sell Plymouth Company owns equipment with a cost of 600,000 and accumulated depreciation of...

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1. Lease or Sell Astro Company owns a equipment with a cost of $365,000 and accumulated depreciation of $52,200 that can be sold for $275,000, less a 4% sales commission. Alternatively, Astro Company can lease the equipment to another company for three years for a total of $285,800, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Astro Company on the equipment would total $16,300 over the three years. 2. Discontinue a Segment Product T has revenue of $195,400, variable cost of goods sold of $116,100, variable selling expenses of $33,900, and fixed costs of $58,500, creating a loss from operations of $13,100. Prepare a differential analysis as of May 9, to determine whether Product T should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or…
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