A company that sells computers has proposed to a small public utility company that it purchased a small electronic computer for P1,000,000 to replace ten calculating machines and their operators. An annual service maintenance contract for the computer will be provided at a cost of P100,000 per year. One operator will be required at a salary of P96,000 per year and one programmer at a salary of P144,000 per year. The estimated economical life of the computer is 10 years. The calculating machine cost P7,000 each when new, 5 years ago, and presently can be sold for P2,000 each. They have an estimated life of 8 years and an expected ultimate trade-in value of P1,000 each. Each calculating machine operator receives P84,000 per year. Fringe benefits for all labor cost is 8% of annual salary. Annual maintenance costs on the calculating machines have been P500 each. Taxes and insurance on all equipment is 2% of the first cost per year If capital costs the company about 25%, would you recommend the computer installation? Ans. Calculating Machines should be replaced.
A company that sells computers has proposed to a small public utility company that it purchased a small electronic computer for P1,000,000 to replace ten calculating machines and their operators. An annual service maintenance contract for the computer will be provided at a cost of P100,000 per year. One operator will be required at a salary of P96,000 per year and one programmer at a salary of P144,000 per year. The estimated economical life of the computer is 10 years. The calculating machine cost P7,000 each when new, 5 years ago, and presently can be sold for P2,000 each. They have an estimated life of 8 years and an expected ultimate trade-in value of P1,000 each. Each calculating machine operator receives P84,000 per year. Fringe benefits for all labor cost is 8% of annual salary. Annual maintenance costs on the calculating machines have been P500 each. Taxes and insurance on all equipment is 2% of the first cost per year If capital costs the company about 25%, would you recommend the computer installation? Ans. Calculating Machines should be replaced.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![2.
A company that sells computers has proposed to a small public utility company that
it purchased a small electronic computer for P1,000,000 to replace ten calculating
machines and their operators. An annual service maintenance contract for the
computer will be provided at a cost of P100,000 per year. One operator will be
required at a salary of P96,000 per year and one programmer at a salary of P144,000
per year. The estimated economical life of the computer is 10 years.
The calculating machine cost P7,000 each when new, 5 years ago, and presently can
be sold for P2,000 each. They have an estimated life of 8 years and an expected
ultimate trade-in value of P1,000 each. Each calculating machine operator receives
P84,000 per year. Fringe benefits for all labor cost is 8% of annual salary. Annual
maintenance costs on the calculating machines have been P500 each. Taxes and
insurance on all equipment is 2% of the first cost per year
If capital costs the company about 25%, would you recommend the computer
installation? Ans. Calculating Machines should be replaced.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdc8d3fb6-ca8c-4bdf-8a26-c8b85febccf3%2F6b7ea8ff-22a6-420c-9da2-dcfb51f20239%2Fpolqdud_processed.png&w=3840&q=75)
Transcribed Image Text:2.
A company that sells computers has proposed to a small public utility company that
it purchased a small electronic computer for P1,000,000 to replace ten calculating
machines and their operators. An annual service maintenance contract for the
computer will be provided at a cost of P100,000 per year. One operator will be
required at a salary of P96,000 per year and one programmer at a salary of P144,000
per year. The estimated economical life of the computer is 10 years.
The calculating machine cost P7,000 each when new, 5 years ago, and presently can
be sold for P2,000 each. They have an estimated life of 8 years and an expected
ultimate trade-in value of P1,000 each. Each calculating machine operator receives
P84,000 per year. Fringe benefits for all labor cost is 8% of annual salary. Annual
maintenance costs on the calculating machines have been P500 each. Taxes and
insurance on all equipment is 2% of the first cost per year
If capital costs the company about 25%, would you recommend the computer
installation? Ans. Calculating Machines should be replaced.
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