Assume That Penguin Co

question 126

Multiple Choice

Assume that Penguin Co. is considering disposing of equipment that cost $50,000 and has $40,000 of accumulated depreciation to date. Penguin Co. can sell the equipment through a broker for $25,000 less 5% commission. Alternatively, Teal Co. has offered to lease the equipment for five years for a total of $48,750. Penguin will incur repair, insurance, and property tax expenses estimated at $10,000. At lease-end, the equipment is expected to have no residual value. The net differential income from the lease alternative is:

• A) $15,000
• B) $ 5,000
• C) $25,000
• D) $12,500

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Definitions:

On-time Deliveries

The performance metric that measures the percentage of orders delivered to the customer within the agreed-upon delivery time.

Organizational Architecture

The structure of an organization. Consists of the assignment of decision rights within the organization, the methods of rewarding individuals, and the systems to evaluate the performance of both individuals and business units.

Product Redesign

The process of changing or updating a product’s features, performance, or aesthetics to meet new market demands or improve efficiency.

Just-In-Time

A production strategy aimed at reducing times within the production system as well as response times from suppliers and to customers.