a. Prepare a differential analysis, dated April 16, 2014, to determine whether Steady should lease (Alternative 1) or sell (Alternative 2) the machinery.
b. On the basis of the data presented, would it be advisable to lease or sell the machinery? Explain.
Answer:
a. Differential Analysis
Lease Machinery (Alt. 1) or Sell Machinery (Alt. 2)
April 16, 2014
Lease
Machinery
(Alternative 1)
Revenues $255,000 $244,000 –$11,000
Costs –23,800 –12,200* 11,600
Income (Loss) $231,200 $231,800 $ 600
a.
* $244,000 × 5%
b. Sell the machinery. The net gain from selling is $600.