Question: On April 1 2013 Topeka Brake Mfg purchased new computer based
On April 1, 2013, Topeka Brake Mfg. purchased new computer-based production scheduling software for $ 480,000. On May 15, 2013, a representative of a computerized manufacturing technology company demonstrated new software that was clearly superior to that purchased by the firm in April. The price of this software is $ 840,000. Corporate managers estimate that the new software would save the company $ 32,000 annually in schedule-related costs compared to the recently installed software. Both software packages should last 10 years (the expected life of the computer hardware) and have no salvage value at that time. The company can sell its existing software for $ 356,000 if the new software is purchased. Should the company keep and use the software purchased earlier or buy the new software? Show computations to support your answer.
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