Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $100,000. The old machines presently have a book value of $60,000 and a market value of $6,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $15,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby
increasing sales revenue by $5,000 a year. Select the true statement.
A. The company will be $20,000 better off over the 5-year period if it keeps the old equipment.
B. The company will be $11,000 better off over the 5-year period if it replaces the old equipment.
C. The company will be $12,000 better off over the 5-year period if it replaces the old equipment.
D. The company will be $6,000 better off over the 5-year period if it replaces the old equipment.
Answer: B
You might also like to view...
All of the following would be tasks of post-implementation review except:
a. ensure a correct conversion by planning, controlling, and conducting an orderly installation of the new system b. determine if the user is satisfied with the new system c. identify how well the system's performance corresponds to the performance requirements d. evaluate the quality of the new system's documentation
The increasing importance of the European Union (EU) as a regional market has prompted a number of companies to change their organizational structures by setting up regional headquarters there
Indicate whether the statement is true or false
The ________ emails were forwarded to the ________ office
A) secretaries/managers B) secretary/manager C) secretarys'/manager's D) secretary's/manager's
Imagine that you have developed a software application and want to raise money for legal advice, filing initial business and regulatory forms, and funding your travel and marketing expenses. Describe how you would fund these early efforts.
What will be an ideal response?