Calculate the equivalent annual cost, Cost Accounting

Assignment Help:

A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company's cost of capital is 10%. Should the present asset be kept or replaced ?. state your recommendation. { TIP: calculate the EAC (Equivalent annual cost) of each of the two options } the following data are provided:

Present asset

Present salvage value : $10.000

Economic life : 1 Year

Next Year's operating and maintenance costs: $51,000

Salvage value in one year: $5,000

Replacement alternative

Capital cost: $200.000

Economic Life: 8 years

Operating and maintenance costs:

Years 1-2: $15,000 per year

Years 3-4: $20,000 per year

Years 5-6: $25,000 per year

Years 7-8: $30,000 per year

Salvage value in 8 years : 25,000

Note: all calculations are approximated to the nearest $100 Option A= keep the old piece of equipment for one more year Option B= buy the new piece and sell the old piece of equipment


Related Discussions:- Calculate the equivalent annual cost

Budget, budget preparation

budget preparation

Job costing, Job Costing This is a costing method that is applied whe...

Job Costing This is a costing method that is applied when a job or cost unit is relatively of small size, is undertaken to fit the customer's specifications and is of compara

What is cost accounting, This can be explained as the process of accumulati...

This can be explained as the process of accumulating, calculating, analyzing, interpreting and reporting cost information that is both helpful and relevant to the internal and exte

Numerical question, Beaver Company (a multi-product firm) produces 5,000 un...

Beaver Company (a multi-product firm) produces 5,000 units of Product X each year. Each unit of Product X sells for $8 and has a contribution margin of $5. If Product X is disconti

Marginal costing, a company wants to buy a new machine to replace on which ...

a company wants to buy a new machine to replace on which is having frequent breakdown.............. .......... c-the models suitable for different levels for demand of product?

Calculate direct materials used, Advertising expense $17,200 Wages expense-...

Advertising expense $17,200 Wages expense-assemblers 36,840 Depreciation expense-machines 21,480 Utilities expense-factory 21,120 Wages expense-lathe operators 23,480 Repair expens

Types of overhead absorption rate, Types of Overhead Absorption Rate ...

Types of Overhead Absorption Rate NB: Overheads incurred are generally absorbed on the basis of budgeted or estimated figures. The given basis may be applied leading to the

Determine the relevant costs, Cowboy Constructions employs a full-time driv...

Cowboy Constructions employs a full-time driver and incurs costs for a vehicle to deliver paperwork between each of their building sites. Select Couriers has offered to carry out t

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd