Question

Differential Analysis for a Lease-or-Sell Decision value of $280,600 (original mulated depreciation of $119,700) for $276,600, less a 5% brokerage commission. Company's Inman Construction Company is considering selling excess machinery with a book cost of $400,300 less accu Alternatively, the machinery can be leased to another company for a total of $283,200 for five years, after which it is expected to have no residual value. During the period of the lease, Inman Construction costs of repairs, insurance, and property tax expenses are expected to be $25,900. a. Prepare a differential analysis, dated May 25 to determine whether Inman should lease (Alternative 1) or sell (Alternative 2) the machinery. For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2) May 25 Differential Effect Lease Machinery (Alternative 1) Sell Machinery (Alternative 2) on Income (Alternative 2) Revenues Costs ncome (Loss) b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain. from selling is s The net Sell or Process Further Bunyon Lumber Company incurs a cost of $372 per hundred board feet (hbf) in processing certain "rough-cut" lumber, which it sells for $548 per hbf. An alternative is to produce a "finished cut" at a total processing cost of $525 per hbf, which can be sold for $760 per hbf. Prepare a differential analysis dated August 9 on whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2). For those boxes in which you must enter subtracted or negative numbers use a minus sign Differential Analysis Sell Rough-Cut (Alt. 1) or Process Further into Finished Cut (Alt. 2) August 9 Sell ProcessDifferential Effect Further into Rough-Cut Finished Cut on Income (Alternative 1 (Alternative 2) (Alternative 2) Revenues, per 100 board ft. Costs, per 100 board ft Income (Loss), per 100 board ft. Determine whether to sell rough-cut lumber (Alternative 1) or process further into finished-cut lumber (Alternative 2).

Answer 1

Differential Analysis
Sell Rough- Cut ( Alt. 1 ) or Process Further into Finished Cut ( Alt. 2 )
9-Aug
	Sell Rough- Cut ( Alternative 1 )	Sell Finished - Cut ( Alternative 1 )	Differential Effect on Income ( Alternative 2 )
Revenues per 100 board ft.	760	548	212
Cost per 100 board ft.	-548	-525	-23
Income ( Loss ), per 100 board ft.	212	23	189
Company should Process Further into Finished Cut.
	Differential Analysis
	Lease Machinery (Alt-1)or sell machinery (Alt 2)
Particulars	Lease Machinery	Sell Machinery	Differential Effect on Income (Alt-2)
	Alt 1	Alt 2
Revenues	283200	276600	-6600
Less Costs	25900	(276600*5%)13830	12070
Income (Loss)	257300	262770	5470
b) Ans:-On the basis of the data presented, it would be advisable to sell the machinery because it leads to incremental income of $ 5470 ($262770- $257300= $1900)
The net income from selling is $5470