Loader Truck Decision Analysis

This management accounting assignment (ACC 202) examines the financial implications of replacing an old loader truck with a new one at Flying Airline Company. A differential cost analysis compares the costs associated with both options, including depreciation, operating expenses, and write-offs. The analysis concludes that replacing the old loader significantly reduces operating costs and ultimately benefits the company's profitability.

Running head: MANAGEMENT ACCOUNTING (ACC 202)
Management Accounting (ACC 202)
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MANAGEMENT ACCOUNTING (ACC 202)
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Table of Contents
Decision for Loader Truck (Situation 1)....................................................................................2
Evaluating the benefits provided from new and old loader of Flying Airline Company:..........2
Reference and Bibliography:......................................................................................................4

MANAGEMENT ACCOUNTING (ACC 202)
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Decision for Loader Truck (Situation 1)
Evaluating the benefits provided from new and old loader of Flying Airline Company:
Situation 1
Particulars Replacing Old
loader
Not replacing Old
loader
Differential cost
Depreciation $ 0 $ 25,000.00 $ 0
Write off $ 25,000.00 $ 0 $ 0
Proceeds from sale $ (5,000.00) $ 0 $ 5,000.00
Depreciation of new loader $ 20,000.00 $ 0 $ (20,000.00)
Operating costs $ 50,000.00 $ 80,000.00 $ 30,000.00
Total $ 90,000.00 $ 105,000.00 $ 15,000.00
The calculation conducted in the above table mainly represents the overall cost
incurred by implementing old or new loader in operations. The cost analysis conducted in the
above table indicates an operating cost for old loader at $105,000, where it is only $90,000
for the new loader. This difference of $15,000 is identified in differential cost analysis, which
portrays the benefits provided from the implementation of new loader. Moreover, if the
Flying Airline Company waits one year for implanting the new loader, it could lose profits by
$15,000 due to increased cost. Therefore, it is essential for Flying Airline Company to make
the decision on increased cost incurred from operations. Patassini (2017) mentioned that cost
reduction is also an appropriate measure, which is used by the company to increase their
profitability.

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In addition, from the evaluation it could be detected that the use of new loader is
much more feasible in comparison with the old loader. Hence, the organisation should change
its loader to reduce its operating cost and generate high income from operations. The decision
for changing the loader needs to be conducted by the management after evaluating the cost
factors indulged in the operation. In this context, Li (2015) stated that organisation with the
help of cost analysis are able to identify the best possible solution for reducing their expenses
and raising cash inflow. The decision of using the new loader could increase Flying Airline
Company’s reserve, which could allow the management to take relevant steps in improving
their operational capability. On the other hand, the use of old loader could only increase
operating cost and decline the actual profits, which could be obtained by the organisation.

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Reference and Bibliography:
Ju, D., Qin, X., Xu, M., DiRenzo, M.S., Hou, M., Liu, H., Fan, P., Wei, Z., Lee, K., Chae,
Y.J. and Shin, I., 2016. Although the mainstream of current thinking in the business literature
recognizes that firms should invest in environmental responsibility, the theory on how
product market competition affects firms’ environmental responsibility remains undeveloped.
Using cost-benefit analysis, we hypothesize that the relationship between product market
competition (ie, differential industry-level competition and... Asia Pacific Journal of
Management, 33(1), pp.267-291.
Li, X., 2015. Accounting conservatism and the cost of capital: An international
analysis. Journal of Business Finance & Accounting, 42(5-6), pp.555-582.
Patassini, D., 2017. Beyond benefit cost analysis: accounting for non-market values in
planning evaluation. Routledge.
Povero, M. and Pradelli, L., 2015. Comparison between traditional and goal directed
perfusion in cardiopulmonary by-pass. Adaptation of a differential cost
analysis. Farmeconomia. Health economics and therapeutic pathways, 16(1S), pp.3-16.