Michelin is considering going lights out in the mixing area of the business that operates 24/7. Currently,
Question:
Michelin is considering going "lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires. New technology is available that has the reliability and consistency desired to equal or ex- ceed the quality of blend now achieved manually. It requires an investment of $3.75 million, with $80,000 per year operational costs and will replace all of the manual effort described above.
a. How are the current manual expenditures handled for tax purposes?
b. How would the new technology expenditures be handled for tax purposes?
Probability & Statistics for Engineers & Scientists
ISBN: 978-0131877115
8th edition
Authors: Ronald E. Walpole, Raymond H. Myers, Sharon L. Myers, Keying Ye