19. Keating Co. is considering disposing of equipment that cost $60,000 and has $42,000 of accumulated...

19.

Keating Co. is considering disposing of equipment that cost $60,000 and has $42,000 of accumulated depreciation to date. Keating Co. can sell the equipment through a broker for $29,000 less a 5% commission. Alternatively, Gunner Co. has offered to lease the equipment for five years for a total of $48,000. Keating will incur repair, insurance, and property tax expenses estimated at $12,000 over the five-year period. At lease-end, the equipment is expected to have no residual value. The net differential profit or loss from the sell alternative is a

a.$12,675 profit

b.$5,915 loss

c.$10,140 profit

d.$8,450 loss

20.

Mighty Safe Fire Alarm is currently buying 62,000 motherboards from MotherBoard, Inc., at a price of $67 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $28 per unit; direct labor, $12 per unit; and variable factory overhead, $14 per unit. Fixed costs for the plant would increase by $73,000. Which option should be selected and why?

a.make, $732,840 increase in profits

b.buy, $732,840 increase in profits

c.make, $806,000 increase in profits

d.buy, $73,000 increase in profits

Expert Solution

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