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

labour cost as the focus, Using  labour  cost  as  the  focus,  discus...

Using  labour  cost  as  the  focus,  discuss  the  differences  in  the measurement  of  labour efficiency / effectiveness where (i)  total quality management techniques and (ii)

Labour cost, labour cost related case study with solution

labour cost related case study with solution

Margin safety ratio, Small Steps sells step stools. Their budget informatio...

Small Steps sells step stools. Their budget information is shown below. selling price: $40 per stool Variable expense:$30 per stool Fixed Expense:$24,000 use the above inform

Case Study solution , I have a project for cost account and I need the sol...

I have a project for cost account and I need the solution for it

Describe time sheets and job cards, (a) Describe briefly how the following ...

(a) Describe briefly how the following are used in the accounting for labour: (i)   time sheets (ii)   job cards. (b) The following details relate to the labour in a produ

What was the cost of raw materials, Raw Materials: Manufacturing Overhead B...

Raw Materials: Manufacturing Overhead Bal 1/1: 36,000 Credits: ? Debits: 383,000 Credits: ? Debits: 470,000 Bal: 12/3: 156,000 Work in Process: Bal 1/1: 73,000 Credits: 770,000

Determine cash flow statement, Download the financials of Shoprite , study ...

Download the financials of Shoprite , study them, then, using ratio analysis, the cash flow statement, and the segmental breakdown of the results, prepare a statement outlining the

Activity-based costing and throughput accounting, The  basic  principles ...

The  basic  principles  of  standard  costing  and  variance  analysis  may  be  adapted  to  the needs of  relatively  new  methods  of  accounting  such  as  activity-based  cost

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