The Enhanced Products Division of Forrest Industries Makes Ceramic Pots

question 121

Essay

The Enhanced Products Division of Forrest Industries makes ceramic pots that are used to hold large decorative plants. During 2013, the division produced 10,000 pots and incurred the following costs:
*The equipment was purchased for $150,000 and has a current book value of $120,000, remaining useful life of four years, and a zero salvage value. If the company does not use the equipment, it can be leased for $8,000 per year.
**Includes supervisors' salaries and rent for manufacturing plant.
Required:
The division is considering replacing the equipment used to manufacture its ceramic pots. Replacement equipment can be purchased at a price of $200,000. The new equipment, which is expected to last 4 years and have a salvage value of $20,000, will reduce unit-level labor costs by 25 percent. Assuming the division desires to maintain its production and sales at 10,000 ceramic pots per year, prepare a schedule that shows the relevant cost of operating the existing equipment versus the cost of operating the new equipment. Should the existing equipment be replaced? Why or why not?

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Definitions:

Interactionist Position

A theoretical perspective that emphasizes the combined effects of biological factors and environmental influences on human behavior and traits.

Authoritative

A parenting style characterized by a high level of demand and high responsiveness, balancing strict guidelines with emotional support and communication.

Phonological Awareness

is the ability to recognize and work with sounds in spoken language, including recognizing rhyme, syllables, and the onset and rimes of words.

Overregularization

A language acquisition error where children apply regular grammatical rules too broadly, indicating their grasp of language structure but resulting in mistakes.