Switching to the labor-intensive process

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Reference no: EM13777487

In evaluating projects, Lead Tech’s engineers use a rate of 15%. One year ago a robotic transfer machine was installed at a cost of $38,000. At the time, a 10-year life was estimated, but the machine has had a downtime rate of 28%, which is unacceptably high. A $12,000 upgrade should ?x the problem, or else a labor-intensive process costing $3,500 in direct labor per year can be substituted. The plant estimates indirect plant expenses at 60% of direct labor, and it allocates front office overhead at 40% of plant expenses (direct and indirect). The robot has a value in other uses of $15,000. What is the difference between the EACs for upgrading and switching to the labor-intensive process?

Reference no: EM13777487

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