A pump has failed in a facility that will be completely replaced in 3 years. A brass pump costing $6000 installed will last 3 years. However, a used stainless steel pump that should last 3 more years has been sitting in the maintenance shop for a year. The pump cost $13,000 new. The accountants say the pump is worth $7000 now. The maintenance supervisor says that it will cost an extra $500 to reconfigure the pump for the new use and that he could sell it used (as is) for $4000. (a) What is the book cost of the stainless steel pump? (b) What is the opportunity cost of the stainless steel pump? (c) How much cheaper or more expensive would it be to use the stainless steel pump rather than a new brass pump?
A pump has failed in a facility that will be completely replaced in 3 years. A brass pump costing $6000 installed will last 3 years. However, a used stainless steel pump that should last 3 more years has been sitting in the maintenance shop for a year. The pump cost $13,000 new. The accountants say the pump is worth $7000 now. The maintenance supervisor says that it will cost an extra $500 to reconfigure the pump for the new use and that he could sell it used (as is) for $4000. (a) What is the book cost of the stainless steel pump? (b) What is the opportunity cost of the stainless steel pump? (c) How much cheaper or more expensive would it be to use the stainless steel pump rather than a new brass pump?
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