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Fanning Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows: Existing Equipment
Fanning Company is considering the replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows:
Existing Equipment | Replacement Equipment | ||||||
Cost | $ | 101,000 | Cost | $ | 106,000 | ||
Operating expenses* | 114,000 | Operating expenses* | 100,000 | ||||
Salvage value | 22,000 | Salvage value | 12,000 | ||||
Market value | 47,000 | Useful life | 5 | years | |||
Book value | 31,000 | ||||||
Remaining useful life | 5 | years | |||||
*The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment.
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Calculate the total relevant cost of existing equipment and the potential replacement equipments. Should the equipment be replaced?
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