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Author Question: Pat, a Pizzeria manager, replaced the convection oven just six months ago. Today, Turbo Ovens ... (Read 56 times)

fbq8i

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on: Mar 6, 2021

Question 1

Overhead costs allocated to the sales office and individual customers are always relevant when deciding whether to drop a customer.
◦ true
◦ false

Question 2

Pat, a Pizzeria manager, replaced the convection oven just six months ago. Today, Turbo Ovens Manufacturing announced the availability of a new convection oven that cooks more quickly with lower operating expenses. Pat is considering the purchase of this faster, lower-operating cost convection oven to replace the existing one they recently purchased. Selected information about the two ovens is given below: 

ExistingNew Turbo Oven
Original cost$60,000$50,000
Accumulated depreciation$ 5,000-
Current salvage value$40,000-
Remaining life5 years5 years
Annual operating expenses$10,000$ 7,500
Disposal value in 5 years$ 0$ 0

Required:
a.  What costs are sunk?
b.  What costs are relevant?
c.  What are the net cash flows over the next 5 years assuming the Pizzeria purchases the new convection oven?
d.  What other items should Pat, as manager of the Pizzeria, consider when making this decision?
Horngren's Cost Accounting: A Managerial Emphasis ¦ Datar, Rajan ¦ 16th Edition
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Marked as best answer by fbq8i on Mar 6, 2021

chem1s3

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Reply #1 on: Mar 6, 2021
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fbq8i

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Reply 2 on: Mar 6, 2021
:D TYSM

ebonylittles

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Reply 3 on: Yesterday
Wow, this really help

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