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Advise the directors of kween bee ltd

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Question - Kween Bee Products Ltd (Reg. No. 32oN181q) is the supplier of honey to Arokya Bee. Kween Bee is in the midst of replacing its machinery that produces the honey supplied to Arokya Bee.

The machinery is depreciated at the rate of 25% per annum using the reducing balance method. It currently has a carrying amount of RM85,000.

The directors are considering replacing all the old machinery with new machinery costing RM160,000. The new machinery, if purchased, would cause direct labour costs to fall by $14,000 a year.

(a) Advise the directors of Kween Bee Ltd whether or not they should proceed with the purchase of the new machinery. Justify your answer.

(b) Discuss critically, the impacts of Kween Bee's decision to replace the machinery on Arokya Bee's business.

Reference no: EM132921668

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