Question
Carol's Cupcakes relies heavily on an industrial mixer to produce its yummy treats. Recently the mixer has not functioned well and some cupcake batches were
Carol's Cupcakes relies heavily on an industrial mixer to produce its yummy treats. Recently the mixer has not functioned well and some cupcake batches were not being produced. A major overhaul costing $10,700 would make the current mixer work properly for the balance of its useful life. Management is considering updating the mixer with a newer improved model model.
Current Mixer | New Model | |
Original Purchase Cost | $30,300 | $23,300 |
Accumulated Depreciation | 16,900 | --- |
Estimated Operating Costs | 3,200 | 2,100 |
Useful Life | 5 years | 5 years |
If sold now, the current mixer would have a salvage value of $4,300. If operated for the remainder of its useful life, the current mixer would have zero salvage value. The new mixer is expected to have zero salvage value after 5 years.Prepare an analysis to show whether the company should retain or replace the mixer by copying and completing the below chart in the answer area
an analysis to show whether the company should retain or replace the mixer by copying and completing the below chart in the answer area
Keep Mixer | Replace Mixer | Net Income Increase/Decrease | |
Period of 5 Years | |||
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