=+2 AP Manufacturing is deciding whether to keep or replace an old machine. It obtains the following
Question:
=+2 AP Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information:
Old machine New machine Original cost $10 700 $9 000 Useful life 10 years 3 years Current age 7 years 0 years Remaining useful life 3 years 3 years Accumulated depreciation $7 490 Not acquired yet Carrying amount $3 210 Not acquired yet Current disposal value (in cash) $2 200 Not acquired yet Terminal disposal value (3 years from now) $0 $0 Annual cash operating costs $17 500 $15 500 AP Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes.
Should AP Manufacturing replace the old machine? Explain.
Step by Step Answer:
Cost Accounting A Managerial Emphasis
ISBN: 9781442563377
2nd Edition
Authors: Monte Wynder, Madhav V. Rajan, Srikant M. Datar, Charles T. Horngren, William Maguire, Rebecca Tan