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Calculate the total relevant cost of existing equipment

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Question - Rooney Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows.

Existing Equipment Replacement Equipment

Cost $110,000 Cost $106,000

Operating expenses* 106,000 Operating expenses* 101,000

Salvage value 27,000 Salvage value 17,000

Market value 46,000

Useful life 10 years

Book value 36,000

Remaining useful life 10 years

*The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment.

Required - Calculate the total relevant cost of existing equipment and the potential replacement equipment. Should the equipment be replaced?

Reference no: EM132847820

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