Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. 3. equivalent annual cost. in evaluating projects,

3. Equivalent annual cost. In evaluating projects, Buford Engineers (BE) uses a discount rate of...

70.2K

Verified Solution

Question

Accounting

image
3. Equivalent annual cost. In evaluating projects, Buford Engineers (BE) uses a discount rate of 15% for a before-tax analysis. One year ago, a robotic transfer machine was installed at a cost of S38,000. At the time, a 10-year life was estimated, but the machine has had a down-time rate of 28%, which is unacceptably high. A S12,000 upgrade should fix the problem, or a labor-intensive process costing $3500 in direct labor per year can be substituted. The plant estimates indirect plant expenses at 60% of direct labor costs, and it allocates front-office overhead at 40% of plant expenses (direct and indirect). The robot has a value in other uses of $15,000. What is the equivalent annual cost for upgrading? For switching to the labor-intensive process

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students