Mountain Gear Has Been Using the Same Machines to Make

question 76

Multiple Choice

Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $100,000. The old machines presently have a book value of $60,000 and a market value of $6,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $15,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $5,000 a year. Select the true statement.

• A)The company will be $11,000 better off over the 5-year period if it replaces the old equipment.
• B)The company will be $20,000 better off over the 5-year period if it keeps the old equipment.
• C)The company will be $12,000 better off over the 5-year period if it replaces the old equipment.
• D)The company will be $6,000 better off over the 5-year period if it replaces the old equipment.

Analyze the influence of early film technologies and systems on modern cinema.

Understand the concept of contribution margin and its application in determining break-even points and target profits.

Analyze the impact of changes in sales volume, selling price, and cost structure on net operating income.

Calculate and interpret the margin of safety in both dollar and percentage terms.

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Definitions:

Collectivist Culture

Pertains to societies that prioritize the needs and goals of the group over individual desires or ambitions.

Rural Environment

An area that is located outside cities and towns characterized by low population density, agricultural or pastoral landscapes, and contains natural features.

Frequency Detection

The ability of a system or organism to perceive and respond to specific frequencies of sound or electromagnetic waves.

Basilar Membrane

A key structure in the cochlea of the inner ear, it vibrates in response to sound, playing a critical role in the mechanical to neural transduction of sound.