Question: Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested
Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $410,000. The old machines presently have a book value of $141,000 and a market value of $33,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $310,000 and have operating expenses of $18,000 a year. The new machines are expected to have a five-year useful fe and no salvage value. The operating expenses associated with the old machines are $51,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $31.000 a year Select the true statement Multiple Choice 0 The company will be $43.000 better off over the 5-year period if it replaces the old equipment. O The company will be $40,000 better off over the 5-year period if it replaces the old equipment O The company will be $82.000 better off over the year period of it keeps the old equipment O The company will be $35.000 better off over the year period fireplaces the old equipment
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