Question 24.1: Casper Company owns office space with a cost of $100,000 and...

Financial and Managerial Accounting

Casper Company owns office space with a cost of $100,000 and accumulated depreciation of $30,000 that can be sold for $150,000, less a 6% broker commission. Alternatively, the office space can be leased by Casper Company for 10 years for a total of $170,000, at the end of which there is no residual value. In addition, repair, insurance, and property tax that would be incurred by Casper Company on the rented office space would total $24,000 over the 10 years. Prepare a differential analysis on May 30, 2014, as to whether Casper Company should lease (Alternative 1) or sell (Alternative 2) the office space.

The blue check mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate.
Learn more on how we answer questions.

Differential Analysis Lease Office Space (Alternative 1) or Sell Office Space (Alternative 2) May 30, 2014
	Lease Office Space (Alternative 1)	Sell Office Space (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues ……………………….	$170,000	$150,000	–$20,000
Costs ……………………….	–24,000	–9,000*	15,000
Income (loss)……………….	$\underline{\underline{\$ 146,000}}$	$\underline{\underline{\$ 141,000}}$	$\underline{\underline{–\$ 5,000}}$
*$150,000 × 6%

Casper Company should lease the office space.

Related Answered Questions

Question: 24.IP.1

Inez Company recently began production of a new product, a digital clock, which required the investment of $1,600,000 in assets. The costs of producing and selling 80,000 units of the digital clock are estimated as follows: Variable costs: Direct materials $10.00 per unit Direct labor 6.00 Factory ...

Verified Answer:

1. $160,000 ($1,600,000 × 10%) 2. a. Total manuf...

Question: 24.3

A company manufactures a subcomponent of an assembly for $80 per unit, including fixed costs of $25 per unit. A proposal is offered to purchase the subcomponent from an outside source for $60 per unit, plus $5 per unit freight. Prepare a differential analysis dated November 2, 2014, to determine ...

Verified Answer:

Differential Analysis Make Subcomponent (Alternat...

Question: 24.2

Product K has revenue of $65,000, variable cost of goods sold of $50,000, variable selling expenses of $12,000, and fixed costs of $25,000, creating a loss from operations of $22,000. Prepare a differential analysis dated February 22, 2014, to determine if Product K should be continued (Alternative ...

Verified Answer:

Differential Analysis Continue K (Alternative 1) ...

Question: 24.8

Product A has a unit contribution margin of $15. Product B has a unit contribution margin of $20. Product A requires three furnace hours, while Product B requires five furnace hours. Determine the most profitable product, assuming the furnace is a constraint. ...

Verified Answer:

Product A Product B Unit contribution margin.......

Question: 24.6

Product D is normally sold for $4.40 per unit. A special price of $3.60 is offered for the export market. The variable production cost is $3.00 per unit. An additional export tariff of 10% of revenue must be paid for all export products. Assume there is sufficient capacity for the special order. ...

Verified Answer:

Differential Analysis Reject Order (Alternative 1)...

Question: 24.5

Product T is produced for $2.50 per gallon. Product T can be sold without additional processing for $3.50 per gallon, or processed further into Product V at an additional total cost of $0.70 per gallon. Product V can be sold for $4.00 per gallon. Prepare a differential analysis dated April 8, 2014, ...

Verified Answer:

Differential Analysis Sell Product T (Alternative ...

Question: 24.4

A machine with a book value of $32,000 has an estimated four-year life. A proposal is offered to sell the old machine for $10,000 and replace it with a new machine at a cost of $45,000. The new machine has a four-year life with no residual value. The new machine would reduce annual direct labor ...

Verified Answer:

Differential Analysis Continue with Old Machine (...

Question: 24.7

Apex Corporation produces and sells Product Z at a total cost of $30 per unit, of which $20 is product cost and $10 is selling and administrative expenses. In addition, the total cost of $30 is made up of $18 variable cost and $12 fixed cost. The desired profit is $3 per unit. Determine the markup ...

Verified Answer:

Markup percentage on product cost:

\frac{\$...