Question
Benson Company is considering the replacement of a machine that is presently used in production. The following data are available: Old Machine New Machine Original
Benson Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000 -
Disposal value now $8,000 -
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
A) Adding all five years together, the total relevant costs to consider if the new machine is purchased is ________.
B) Adding all five years together, the total relevant costs to consider if the old machine is not replaced is ________.
C) Adding all five years together, what is the difference in total relevant costs between the old machine and the new machine?
D) Should the old machine be replaced?
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