ACCT301 Week 5 Assignment

Problem 1

Required: Identify each of the following as either a direct or indirect cost.

(20 points)

Direct or Indirect? 

Material used in production

Salary of manufacturing supervisor

Wages of manufacturing worker

Telephone costs

Rent

Problem 2

Required: GH Company is trying to decide whether to replace a current piece of machinery with a new machine. Using the below data, determine the relevant costs of the old machine and the new machine. Should GH Company purchase the new machine?

(30 points)

Old MachineNew machine

Original cost 100,000

Accumulated depreciation (50,000)

Book value 50,000

Market value (now) 25,000 30,000

Salvage value (in 5 years) 5,000 8,000

Annual depreciation expense 11,000

Operating expenses

   Per year 9,000 4,500

   Times number of years 4 4

Total operating expenses 36,000 18,000