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Please explain in details since its part of my final. Thank you for your help...

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Accounting

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Please explain in details since its part of my final. Thank you for your help

Chapter 7. Relevant Cost concept for decision making. Calculate the five year costs and identify the least cost option Step 1: identify the relevant costs. Step 2: determine if the cost is 1 time or recurs for each of the 5 years. If it is one time, multiply x 1, if it is a 5 year cost then multiply by 5 Step 3: Add up all of the costs for each model and determine which machine has the LOWEST 5 year cost to the company. You are planning to purchase a range and have to make a choice among the following three models of the same type of equipment: Model IModel 2 Model 3 Cash cost Estimate life Trade-in value at end of life Cash from sale of old machine Installation of new machine Initial training cost in Year I Annual maintenance contract Annual cost of supplies Annual wage costs of employees S 5,000 5,500 5,300 years 5 years 5 1,000 1,200 S 200 200 S 80 120 S 350 300 S 275 300 S 175225 32,000 $32,000 800 200 100 325 250 200 $32,000 CHAPTER 7 COST MANAGEMENT Using the concept of relevant costs over the five-year period, which model would be the best investment? (Nore: In your calculations, ignore any costs that are not relevant.)

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