Differential Analysis for a Lease or Buy Decision Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,040. The freight and installation costs for the equipment are $660. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the equipment from a domestic supplier for $1,480 per year for four years, with no additional costs. Question Content Area Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a “lease or buy” decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0". Differential AnalysisLease (Alt. 1) or Buy (Alt. 2) EquipmentMarch 15 Lease Equipment (Alternative 1) Buy Equipment (Alternative 2) Differential Effects (Alternative 2) Costs: Purchase price $fill in the blank e49412f4f069015_1 $fill in the blank e49412f4f069015_2 $fill in the blank e49412f4f069015_3 Freight and installation fill in the blank e49412f4f069015_4 fill in the blank e49412f4f069015_5 fill in the blank e49412f4f069015_6 Repair and maintenance (4 years) fill in the blank e49412f4f069015_7 fill in the blank e49412f4f069015_8 fill in the blank e49412f4f069015_9 Lease (4 years) fill in the blank e49412f4f069015_10 fill in the blank e49412f4f069015_11 fill in the blank e49412f4f069015_12 Total costs $fill in the blank e49412f4f069015_13 $fill in the blank e49412f4f069015_14 $fill in the blank e49412f4f069015_15

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 2E

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Question Content Area

Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a “lease or buy” decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0".

Differential AnalysisLease (Alt. 1) or Buy (Alt. 2) EquipmentMarch 15

	Lease Equipment (Alternative 1)	Buy Equipment (Alternative 2)	Differential Effects (Alternative 2)
Costs:
Purchase price	$fill in the blank e49412f4f069015_1	$fill in the blank e49412f4f069015_2	$fill in the blank e49412f4f069015_3
Freight and installation	fill in the blank e49412f4f069015_4	fill in the blank e49412f4f069015_5	fill in the blank e49412f4f069015_6
Repair and maintenance (4 years)	fill in the blank e49412f4f069015_7	fill in the blank e49412f4f069015_8	fill in the blank e49412f4f069015_9
Lease (4 years)	fill in the blank e49412f4f069015_10	fill in the blank e49412f4f069015_11	fill in the blank e49412f4f069015_12
Total costs	$fill in the blank e49412f4f069015_13	$fill in the blank e49412f4f069015_14	$fill in the blank e49412f4f069015_15

Differential Analysis for a Lease or Buy Decision
Laredo Corporation is considering new equipment. The equipment can be purchased from an overseas supplier for $3,040. The freight and installation costs for the equipment are
$660. If purchased, annual repairs and maintenance are estimated to be $410 per year over the four-year useful life of the equipment. Alternatively, Laredo Corporation can lease the
equipment from a domestic supplier for $1,480 per year for four years, with no additional costs.
Prepare a differential analysis dated March 15 to determine whether Laredo Corporation should lease (Alternative 1) or purchase (Alternative 2) the equipment. (Hint: This is a "lease
or buy" decision, which must be analyzed from the perspective of the equipment user, as opposed to the equipment owner.) If an amount is zero, enter "0".
Costs:
Differential Analysis
Lease (Alt. 1) or Buy (Alt. 2) Equipment
March 15
Purchase price
Freight and installation
Repair and maintenance (4 years)
Lease (4 years)
Total costs
Lease
Buy
Differential
Equipment
Equipment
Effects
(Alternative 1) (Alternative 2) (Alternative 2)
3,040 X
660 X
00000
QOOQ
$

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