The Always Late Construction Co

question 54

Essay

The Always Late Construction Co. is about to sell some used equipment to Early Leasing. Always Late has offered the following two payment schemes:
a. $50,000 now and $300,000 at the end of ten years.
b. $50,000 now, $25,000 at the end of each of the next six years.
If the applicable discount rate for either transaction is 12%, which would be the better alternative for Early? Why?

---

Definitions:

Equivalent Units

A concept in cost accounting used to apportion costs to partially completed units of product, allowing for the calculation of per-unit costs in process costing environments.

Molding Department

A specialized section within a manufacturing plant where raw materials are shaped into components through various molding processes.

Process Cost Summary

A report detailing the total costs associated with the production process, including materials, labor, and overhead expenses, over a specific period.

Equivalent Units

A concept used in cost accounting to indicate a quantity of finished goods that could have been produced given the amount of resources actually consumed during a period.