Question: Problem 7. Retain or replace an old asset. SLU operates a cafeteria for its employees. The operations of the cafeteria requires fixed costs of p980,000

 Problem 7. Retain or replace an old asset. SLU operates a

Problem 7. Retain or replace an old asset. SLU operates a cafeteria for its employees. The operations of the cafeteria requires fixed costs of p980,000 per month and variable costs at 45% of sales. Cafeteria sales currently average P2,200,000 per month. The company has the opportunity to replace the cafeteria with velding machines. Gross customer spending at the vending machines is estimated to be 40% greater than the current sales because the machines are available at all hours. By replacing the cafeteria with vending machines, the company would receive 15% of the gross customer spending and avoid all cafeteria costs. Should SLU retain its cafeteria operations or sell using vending machines

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