Question

a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a newer one. The old machine originally cost $5,000 and has been fully depreciated. Annual costs are $3,500. Canton high school is willing to buy it for $1,000. New equipment would cost $18,000 and annual operating costs would be $1,500. The new machine has an estimated useful life of 5 years, and the old machine will last another 5 years. Please Prepare a proposal and determine if we should replace the old equipment.

Answer 1

GIVEN DATA:

old machine originally cost = $5,000

Annual costs = $3,500

Canton high school buy =   $1,000

New equipment  cost = $18,000

Annual operating costs = $1,500

New machine estimated = 5 years

Old machine last another = 5 years.

REQUIRED:

Prepare a proposal and determine if we should replace the old equipment?

SOLUTION:

Annual cost = 3500

Old machine(last) = 5 years

Total Cost of Old Machine = 3500 * 5

= 17,500$

Therefore cost associated for 5 years is 17,500$

New equipment  cost = 18,000

Wiling to brought = 1,000

Annual operating costs = 1,500

New machine(estimated) = 5 years

Total Cost of New Machine = (18000 -1000 ) +1500 * 5

= 17000 +1500 *5

= 17000 +7500

= 24,500$

Therefore cost associated for 5 years is 24,500$

NET Cost savings with Old Machine = 24500 - 17500

= 7000$

" THEREFORE THE OLD MACHINE SHOULD NOT BE REPLACED WITH THE NEW MACHINE "