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Chattanooga Development Company wants to evaluate replacing an older machine requiring significant maintenance which delays production. The older machine can be used for 2 more
Chattanooga Development Company wants to evaluate replacing an older machine requiring significant maintenance which delays production. The older machine can be used for 2 more years of production. The Company could buy a replacement machine at a cost of $55,000 and the new machine would have a 2-year life. The units produced by the machine have a sales price of $8.50. The older machine produces an average of 50 units per day at a cost of $6.50 per unit. The new machine would produce twice as many units at the same cost. Sales units and production units are the same volume, and the machines are operated for 260 days each year. Prepare the analysis to evaluate whether the Company should retain or replace the machine. Indicate what the INSTRUCTIONS: Company should do
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