Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. relevant costs for equipment replacement decision

Relevant Costs for Equipment Replacement Decision Health Scan, Inc. paid $50,000 for X-ray equipment four...

80.2K

Verified Solution

Question

Accounting

Relevant Costs for Equipment Replacement Decision Health Scan, Inc. paid $50,000 for X-ray equipment four years ago. The equipment was expected to have a useful life of 10 years from the date of acquisition with annual operating costs of $50,000. Technological advances have made the machine purchased four years ago obsolete with a zero salvage value. An improved X-ray device incorporating the new technology is available at an initial cost of $146,000 and annual operating costs of $23,000. The new machine is expected to last only six years before it, too, is obsolete. Asked to analyze the financial aspects of replacing the obsolete but still functional machine, Health Scan's accountant prepared the following analysis. After looking over these numbers, the Center's manager rejected the proposal.

Six-year savings [($50,000 $23,000) 6] $162,000
Cost of new machine (146,000)
Undepreciated cost of old machine (30,000)
Advantage (disadvantage) of replacement $(14,000)

Calculate the net benefit (cost) of purchasing the new machine

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