Duncan Company owns a machine with a cost of $75,000 and accumulated depreciation of$15,000 that can be sold for $54,000 less a 5% sales commission. Alternatively, Duncan Company can lease the machine to another company for three years for a total of$60,000, at the end of which there is no residual value. In addition, the repair, insurance, and property tax expense that would be incurred by Duncan Company on the machine would total $8,500 over the three years. Prepare a differential analysis on February 21 as to whether Duncan Company should lease (Alternative 1) or sell (Alternative 2) the machine.

The condensed product-line income statement for Dish N’ Dat Company for the month of March is as follows:

$$\begin{array}{lccc} &\text { Bowls } &\text { Plates } & \text { Cups } \\\hline \text{Sales}& \$71,000 &\$105,700 &\$31,300\\ \text{Cost of goods sold}& 32,600 &42,300& 16,800\\ \text{Gross profit}& \$38,400 &\$ 63,400 &\$14,500\\ \text{Selling and administrative expenses}& 27,400 &42,800& 16,700\\ \text{Income from operations}& \$11,000 &\$ 20,600 &\$(2,200)\\ \end{array}$$

Fixed costs are 15% of the cost of goods sold and 40% of the selling and administrative expenses. Dish N’ Dat assumes that fixed costs would not be materially affected if the Cups line were discontinued.

A. Prepare a differential analysis dated March 31 to determine if Cups should be continued (Alternative 1) or discontinued (Alternative 2).

Granite Construction Company is considering selling excess machinery with a book value of $175,000 (original cost of$315,000 less accumulated depreciation of $140,000) for$180,000, less a 5% brokerage commission. Alternatively, the machinery can be leased for a total of $200,000 for four years, after which it is expected to have no residual value. During the period of the lease, Granite Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be$34,400.

A. Prepare a differential analysis, dated November 7 to determine whether Granite should lease (Alternative 1) or sell (Alternative 2) the machinery.

A company could sell a building for $250,000 or lease it for$2,500 per month. What would need to be considered in determining if the lease option would be preferred?

Inman Construction Company is considering selling excess machinery with a book value of $\$ 280,000$ (original cost of $\$ 400,000$ less accumulated depreciation of $\$ 120,000$ ) for $\$ 292,000$, less a $5 \%$ brokerage commission. Alternatively, the machinery can be leased for a total of $\$ 312,000$ for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction Company's costs of repairs, insurance, and property tax expenses are expected to be $\$ 36,000$.

Prepare a differential analysis report, dated January $3$, $2010$, for the lease or sell decision.

Matrix Construction Company is considering selling excess machinery with a book value of $75,000 (original cost of$200,000 less accumulated depreciation of $125,000) for$60,000 less a 5% brokerage commission. Alternatively, the machinery can be leased to another company for a total of $75,000 for five years, after which it is expected to have no residual value. During the period of the lease, Matrix Construction Company’s costs of repairs, insurance, and property tax expenses are expected to be$21,500.

a. Prepare a differential analysis dated May 25 to determine whether Matrix should lease (Alternative 1) or sell (Alternative 2) the machinery.

b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.

Mainline Marine Company has total estimated factory overhead for the year of $2,090,000, divided into four activities: fabrication,$ 750,000; assembly, $240,000; setup,$ 600,000; and inspection, $ 500,000. Mainline manufactures two types of boats: a speedboat and a bass boat.

Product A has a unit contribution margin of $24. Product B has a unit contribution margin of$30. Product A requires four testing hours, while Product B requires six testing hours. Determine the most profitable product, assuming that the testing is a production bottleneck.

Light Force Inc. produces and sells lighting fixtures. An entry light has a total cost of $180 per unit, of which$100 is product cost and $80 is selling and administrative expenses. In addition, the total cost of$180 is made up of $110 variable cost and$70 fixed cost. The desired profit is $45 per unit. Determine the markup percentage on product cost.

Product A is normally sold for $9.60 per unit. A special price of$7.20 is offered for the export market. The variable production cost is $5.00 per unit. An additional export tariff of 15% of revenue must be paid for all the export products. Assume there is sufficient capacity for the special order. Prepare a differential analysis dated March 16, 2014, on whether to reject (Alternative 1) or accept (Alternative 2) the special order.

Product D is produced for $24 per gallon. Product D can be sold without additional processing for$36 per gallon, or processed further into Product E at an additional cost of $9 per gallon. Product E can be sold for$\43$per gallon. Prepare a differential analysis dated February 26 on whether to sell Product D (Alternative 1) or process further into Product E (Alternative 2).

A machine with a book value of $80,000 has an estimated five-year life. A proposal is offered to sell the old machine for$50,500 and replace it with a new machine at a cost of $75,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from$11,200 to $7,400. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)

A machine with a book value of $80,000 has an estimated five-year life. A proposal is offered to sell the old machine for$50,500 and replace it with a new machine at a cost of $75,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from$11,200 to $7,400. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2).

The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges):

$$\begin{array}{lr} \text { Sales } & \$ 82,500,000 \\ \text { Cost of goods sold } & \underline{53,625,000} \\ \text { Gross profit } & \$ 28,875,000 \\ \text { Administrative expenses } & \underline{15,675,000} \\ \text { Income from operations } & \underline{\underline{\$ 13,200,000}} \\ \end{array}$$

The manager of the Consumer Products Division is considering ways to increase the return on investment.

a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $55,000,000 of assets have been invested in the Consumer Products Division.

b. If expenses could be reduced by$1,650,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division?