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

Factors affect decision making, Factors affect Decision Making These d...

Factors affect Decision Making These decisions need consideration of factors as like A. The level of market possible to be available in future B. The strategy that compe

Income and expenditure account, The following is a summary of a cash book f...

The following is a summary of a cash book for the year ended 31 April 2012 Payments                              $              Receipts                                    $

Calculate operating income under throughput costing, The follow data relate...

The follow data relates ot year 20XX for Plano Manufacturing Company: Units produced - 2,000 Units sold - 1,800 Selling price - $200 / per unit Direct material costs - $80,000 Dire

The weaknesses of an incremental budgeting system, Traditional budgeting  s...

Traditional budgeting  systems are  incremental  in nature and  tend  to  focus on  cost  centres.  Activity-based  budgeting  links  business  planning  to  the  budgeting  proces

What is the dollar amount of direct material a, Win Corporation sells a sin...

Win Corporation sells a single product. Budgeted sales for the year are anticipated to be 609,725 units, estimated beginning inventory is 107,791 units, and desired ending inventor

Calculate the amount of gross profit, Samuel Construction Company engaged i...

Samuel Construction Company engaged in a contract to construct a building on 1 July 2011 with completion of the contract by the 30 June 2014.  The contract price amounted to a tota

Total annual sales revenue, Mr. Homer Simpson, President and Chief Executiv...

Mr. Homer Simpson, President and Chief Executive Officer of Duff's Beer Making Supplies Inc. recently hired you as the new budget analyst for his company.  As your first duty, he h

Segment reporting, Juniper Ltd is a listed diversified company.  In prepari...

Juniper Ltd is a listed diversified company.  In preparing its financial statements in accordance with AASB 8, the chief operating officer has identified three operating segments:

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