15. Swifty Corporation produces face cream. Each bottle of face cream costs $6 to produce and...

15. Swifty Corporation produces face cream. Each bottle of face cream costs $6 to produce and can be sold for $9. The bottles can be sold as is, or processed further into sunscreen with an additional cost of $10 each. Swifty Corporation could sell the sunscreen bottles for $14 each.

Face cream must be processed further because it increases profit by $3 each.

Face cream must not be processed further because costs increase more than revenue.

Face cream must be processed further because its profit is $4 each.

Face cream must not be processed further because it decreases profit by $10 each.

17. Sheridan Company gathered the following data about the three products that it produces:

Product	Present Sales Value	Estimated Additional Processing Costs	Estimated Sales if Processed Further
A	$13600	$8800	$23400
B	15600	5800	20400
C	12600	3800	18400

Which of the products should not be processed further?

Product A

Product B

Product C

Products A and C

20. Concord Corporation is considering the replacement of a piece of equipment with a newer model. The following data has been collected:

	Old Equipment	New Equipment
Purchase price	$145000	$240000
Accumulated depreciation	58000	- 0 -
Annual operating costs	192000	153000

If the old equipment is replaced now, it can be sold for $39100. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.

Which of the following amounts is irrelevant to the replacement decision?

$192000

$240000

$39100

$87000

Please answer all 3 questions! Thank you!

Solutions

Expert Solution

15.
Answer is b. Face cream must not be processed further because costs increase more than revenue.
Since Incremental Revenue $5 i.e. ($14-9) is lower than additional costs $10

17.

	Product A	Product B	Product C
Present Sales Value	$ 13,600	$ 15,600	$ 12,600
Sales value if processed further	$ 23,400	$ 20,400	$ 18,400
Incremental Revenue	$ 9,800	$ 4,800	$ 5,800
Additional Costs	$ 8,800	$ 5,800	$ 3,800
Incremental Profit (Loss)	$ 1,000	$ (1,000)	$ 2,000

Answer is b. Products B should not be processed further

18.
Answer is d. $87000 i.e. Net Book value of old equipment

ekkarill92 answered 1 year ago

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