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3 (Retain or Replace Equipment) Chudzick Company has a factory machine with a book value of $180,000 and a remaining useful life of five years.
3 (Retain or Replace Equipment) Chudzick Company has a factory machine with a book value of $180,000 and a remaining useful life of five years. A new machine is available at a cost of $300,000. This machine will have a five-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $700,000 to $550,000. Prepare an analysis that shows whether Chudzick should retain or replace the old machine. [5 marks] Question 4 (Eliminate Unprofitable Segment) Lisah Inc. manufactures golf clubs in three models. For the year, the Big Bart line has a net loss of $10,000 from sales $200,000, variable costs $180,000, and fixed costs $30,000. If the Big Bart line is eliminated, $20,000 of fixed costs will remain. Prepare an analysis showing whether the Big Bart line should be eliminated. [5 marks]
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