chooes

The company is contemplating the purchase of a new labor saving machine that will cost 40,000 and have a 10-year useful life the company annual cost with and without the new machine are shown below: Current situation new machine Unit produced and sold 4000 4000 Direct material cost per unit 14 14 Direct labor cost per unit 8 Variable overhead cost per unit 2 2 Fixed cost, other 62000 62000 Increased in fixed cost, new machine 3000 By considering only the relevant costs, the net annual cost saving promised by new machine equal 5 9000 6000 300