Relevant costs and equipment replacement decision Anderson Department Stores is considering the replacement of the existing elevator system at its downtown store. A new system has been proposed that runs faster than the existing system, experiences few breakdowns, and as a result promises considerable savings in operating costs. Information on the existing system and the proposed new system follow:

Required(a) What costs are not relevant to this decision?(b) What are the relevantcosts?

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EXISTING SYSTEM S300,000 CATEGORY Original cost Remaining life Annual cash operating costs Salvage value at present Salvage value in 6 years NEW SYSTEM S875,000 6 years $8,000 6 years $150,000 $100,000 $25,000 $100,000