Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its production equipment. Cari Heat (CH) is evaluating two options for its production equipment: upgrading or replacing. The company manufactures and sells 7,500 heaters every year, each priced at $920. The current production equipment, which was acquired at a cost of $2,150,000, has been in use for just two years and is subject to straight-line depreciation over a five-year useful life. Furthermore, it possesses no terminal disposal value, but it can be currently sold for $650,000. The following table presents data for the two alternatives: ABC 1 Choice Upgrade Replace 2 One-time equipment costs $3,500,000 3 Variable manufacturing cost per Heater $180 $90 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment 0 0 Required 1. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade its production line or replace it?
Cari Heat (CH) Ltd. is currently faced with a critical decision regarding its production equipment. Cari Heat (CH) is evaluating two options for its production equipment: upgrading or replacing. The company manufactures and sells 7,500 heaters every year, each priced at $920. The current production equipment, which was acquired at a cost of $2,150,000, has been in use for just two years and is subject to straight-line
The following table presents data for the two alternatives:
ABC 1 Choice Upgrade Replace
2 One-time equipment costs $3,500,000
3 Variable
Required
1. Prepare a schedule, for the remaining 3 years, reflecting whether CH should upgrade its production line or replace it?
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