Calculate the equivalent annual cost, Cost Accounting

Assignment Help:

A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company's cost of capital is 10%. Should the present asset be kept or replaced ?. state your recommendation. { TIP: calculate the EAC (Equivalent annual cost) of each of the two options } the following data are provided:

Present asset

Present salvage value : $10.000

Economic life : 1 Year

Next Year's operating and maintenance costs: $51,000

Salvage value in one year: $5,000

Replacement alternative

Capital cost: $200.000

Economic Life: 8 years

Operating and maintenance costs:

Years 1-2: $15,000 per year

Years 3-4: $20,000 per year

Years 5-6: $25,000 per year

Years 7-8: $30,000 per year

Salvage value in 8 years : 25,000

Note: all calculations are approximated to the nearest $100 Option A= keep the old piece of equipment for one more year Option B= buy the new piece and sell the old piece of equipment


Related Discussions:- Calculate the equivalent annual cost

Test accounting of monetary instruments, This question tested the accountin...

This question tested the accounting of monetary instruments, especially an asset held at reasonable value through loss or profit. The preparation of the journal for subsequent and

Overhead variances, Overhead Variances This explains how the variable ...

Overhead Variances This explains how the variable overhead total variance and the fixed overhead total variances calculated. You can recall the overheads refer to production c

Accounting records - nature and purpose of cost accounting, Accounting Reco...

Accounting Records - Nature and Purpose of Cost Accounting The quantitative information employed in the management and cost accounting systems can be obtained from with two ac

Internal control activities regarding replacement purchases, Your firm is t...

Your firm is the auditor of Easy Hire Pty Ltd (Easy Hire).the company hires out equipment to industries such as construction, engineering & event management. It has 76 branches nat

Profit analysis and cost volume or cvp analysis, Profit Analysis and Cost V...

Profit Analysis and Cost Volume or CVP Analysis CVP Analysis checks the relationship between profit, activity level and the cost. CVP Analysis assists in a broad range of p

Reasons for cost allocation, Reasons for Cost Allocation 1. To provide...

Reasons for Cost Allocation 1. To provide comparison along with externally provided services:  It helps in assessing where to continue the contact or service outsiders. 2.

Tracking overhead, Tracking Overhead Jack would have a many task at han...

Tracking Overhead Jack would have a many task at hand if he tried to daily trace all such items of overhead. For example: x     How difficult it would  become to track the "

Calculate the approximate yield to maturity of the bonds, Netflix Inc wants...

Netflix Inc wants to issue discount bonds with a market value equal to 45% of their face value. The income tax rate of Netflix is 30%. The bonds will carry 3.5% coupon, paying inte

Determine the ratio of the sales, 1) Jodie received a $2000 college entranc...

1) Jodie received a $2000 college entrance scholarship. Nine month later Brian was awarded a $2100 academic proficiency scholarship for his outstanding grades in the first year of

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd