Doulas County's Photocopying
Old Equipment Proposed Replacement Equipment
Useful life in years 5 3
Current age in years 2 0
Useful life remaining, in year 3 3
Original cost $25,000 $15,000
Accumulated amortization $10,000 0
Book Value $15,000 Not acquired yet
Disposal value(in cash) now $6,000 Not acquired yet
Disposal value in two years 0 0
Annual cash operating costs for power maintenance, toner, and supplies $14,000 $9,000
Assume the new equipment will have a three year life. Ignore taxes.
1. What are the relevant and irrelevant costs.
2. Would a list of only relevant costs be more clear than the list from #1?
3. Prepare an analysis to support your choice of alternatives.
Relevant costs are:
Disposal of old equipment
Cost of new equipment
Operating costs for both machines for the three ...
The relevant and not relevant costs are shown and an analysis prepared for your study.