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CoursHeroTranscribedText: Q-3. MM currently carries out process E the output from which can be sold for $211] per unit and has variable costs of $150 per unit. Process B has directly attributable fixed operating costs of S 4mm per annum. MM also carries out process C by using equipment that has running costs of$ Etlll per annum. The equipment eotdd be sold now for $500M {but this would incur dismantling costs of STSDD} or in one year's time for $45009 with dismantling costs of $8160. Process E- could be adapted so that it incorporated process C. {a} The existing process B machinery would have to be removed, either now at a dismantling cost of $125M) and with the sale of the machinery for iltl or in one year's time for $T5tlll with dismantling costs of $133511]. {b} Alternative process B machinery would have to be leased. This would cost Sltllltl per annum and have annual xed costs of'lltl. The existing process B machinery originally costs EESDDll which bought ve years ago. It is being depreciated at 10% per annum. Required: Prepare an analysis on an incremental opportunity cost basis to decide on nancial grounds whether to adopt process B immediately or to delay it for one year. Ignore the time 1Il'aIue of money. 0

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