Homework Answers
ANSWER:
| Particulars | keep old machine | purchase new machine |
|---|---|---|
| Current disposal value | $77000 | $229000 |
| Less: salvage value | ($17000) | ($65000) |
| $60000 | $164000 | |
| Operating costs (b) | $39000 x 9 = $351000 | $12000 x 9 = $108000 |
| Total costs | $411000 | $272000 |
Conclusion:
the total cost of old machine is higher than that of new machine. Therefore, old machine should be replaced.
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