fo Tone PM CHICEROWAVE YOUR WE 124 14 15 Question 2 - 15 marks 10 41 14 SN 02. Greenlife Woodworks Ine is considering asing two different items of machinery, as described below Machine A A machine has just come onto the market that compresses awdust into various shelving products. Currently, the swust is 42 disposed of as a waste product. The following information is wilable about the machine The machine would cost $800,000 and would have a 25% salvage value at the end of its 10 year clul life. The company uses straight line depreciation and considers salvage value in computing depreciation deductions 40 b. The shelving products produced by the machine would generate revenues of $380.000 per year. Variable manufacturing 47 costs would be 20% of sales 48. Fixed annual expenses associated with the new shelving products would be advertising, 545,000 salaries, $80.000 49 utilities, S10,000, and insurance, $15,000 50 51 Machine B: 52 A second machine has come onto the market that would automate a sanding process that is now donc 53 Largely by hand. The following information is available about this machine: 54 55 a. The new sanding machine would cost $220,000 and would have no salvage value at the end of its 10-year weful life 56 The company would use straight-line depreciation. S7 b. Several old pieces of sanding equipment that are fully depreciated would be disposed of at a scrap value of S7,200 58 c. The new sanding machine would provide substantial noual savings in cash operating costs. It would require an 59 operator at an annual salary of $26,000 and $3,000 inanmal maintenance costs. The current, hand-operated sanding GO procedure costs the company $85.000 per year. 61 12 The company reanires simple rate of return of 16% on all equipment purchases and also the cortany 1