A guitar manufacturer is considering eliminating its electric guitar division because its $76,000 expenses are higher than its $72,000 sales. The company reports the following expenses for this division. Should the division be eliminated?
|
Cost of goods sold |
$55,000 |
|
|
Direct expenses |
6,250 |
$2,250 |
|
Indirect expenses |
470 |
3,600 |
|
Service department costs |
7,000 |
1,430 |
Tak Company has a machine with a book value of $50,000 and a remaining five year useful life. A new machine is available at a cost of $75,000, and Tak can also receive $40,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $12,000 per year over its five year useful life. Should the machine be replaced?