Question: A machine purchased three years ago for $310,000 has a current book value using straight-line depreciation of $184,000; its operating expenses are $30,000 per year. A replacement machine would cost $228,000, have a useful life of nine years, and would require $11,000 per year in operating expenses. It has an expected salvage value of $70,000 after nine years. The current disposal value of the old machine is $81,000; if it is kept 9 more years, its residual value would be $17,000.

Required: a. Calculate the total costs in keeping the old machine and purchase a new machine.

b. Should the old machine be replaced?

Yes

No

2. Milton Company has three departments occupying the following amount of floor space:

Department 1 20,000 sq. ft.

Department 2 11,400 sq. ft.

Department 3 30,000 sq. ft.

How much store rent should be allocated to Department 2 if total rent is equal to $105,000? (Do not round your intermediate calculations, round final answer to nearest whole dollar amount.)

$30,000

$51,303

$19,495

None of these answers is correct.

3. Paul's Department Store has three departments: Men's, Women's and Children's. The store incurred $33,000 of store rental costs in 2013. The departments identified the following cost drivers for 2013:

                                                  Men's            Women's              Children's

Labor dollars                              $533,000           $778,000             $243,000

Number of employees                        13                    23                      7

Square footage                              3,300                8,300                  1,300

Number of sales transactions          303,000             903,000                93,000

Using the most appropriate cost driver, how much rental cost (rounded to the nearest dollar) should be allocated to the Children's Department? (Do not round your intermediate calculations.)

$3,326

$2,363

$5,160

$5,372