Purchasing the equipment from productivity viewpoint

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Bob's botique makes 1,000 bagels per week, on average. Bob's current equipment has a book value of $15,000, and is expected to last for five more years. Bob's current labor costs are $13,500 per year. Bob is open all year long. a. what is the current productivity in terms of units of output per dollar unit? b. Bob has the option of purchasing new equipment at a cost of $20,000 (thus getting rid of the old machine) . It will be able to produce 3,000 bagles per week for 10 years. However, it will require that Bob hire one more worker, for $13,000 to operate the equipment. GIven that Bob expects that he will be able to sell all the bagles he produces, should he consider purchasing the equipment from a productivity viewpoint?

Reference no: EM131660772

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