Rugby Corp. is considering replacing one of its testing machines. The CEO feels that new machine is more efficient and hence will save costs to company. The following information is available: Old Machine
New Machine
Original cost
$10,000,000
$5,500,000
Useful life
4 years
2 years
Current age
2 years
0
Remaining useful life
2 years
2 years
Accumulated depreciation
$5,000,000
Book value
$5,000,000
Current disposal value
$50,000
Terminal disposal value(2 years from now)
$0
$0
Annual operating costs
$12,000,000
$8,500,000
Should Rugby Corp. replace the old machine?

Oerstman, inc. uses a standard costing system and develops its overhead rates from the current annual budget. the budget is based on an expected annual output of 120,000 units requiring 480,000 direct labor hours.(practical capacity is 500,000 hours)annual budgeted overhead costs total $772,800, of which $556,800 is fixed overhead. a total of 119,300 units, using 478,000 direct labor hours, were produced during the year. actual variable overhead costs for the year were $260,400 and actual fixed overhead costs were $555,450.required: 1. compute the fixed overhead spending variance and indicate if favorable or unfavorable.2. compute the fixed overhead volume variance and indicate if favorable or unfavorable.