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Doulas County Replacement Costs

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Doulas County's Photocopying

Equipment Replacement

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.

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Solution Summary

The relevant and not relevant costs are shown and an analysis prepared for your study.

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Relevant costs are:

Disposal of old equipment
Cost of new equipment
Operating costs for both machines for the three ...

Solution provided by:
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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