Question: The Auto has a machine that installs tires. The machine is now in need of repair. The machine originally cost $10,000 and the repair will

The Auto has a machine that installs tires. The machine is now in need of repair. The machine originally cost $10,000 and the repair will cost $1,000, but the machine will then last two years. The labor cost of operating the machine is 50 cents per tire. Instead of repairing the old machine, The Auto could buy a new machine at a cost of $5,000 that would also last two years; the labor cost would then be reduced to 25 cents per tire. Should the machine be repaired or replaced if The Auto expects to install 10,000 tires in the next two years?

Original cost of machine =	$10,000
Repair cost =			$1,000
Labor cost/tire:
Existing machine =		$0.50	per tire
New machine =		$0.25	per tire
Cost of new machine =		$5,000
Estimated two-year volume =	10,000	tires

Required:To earn full or partial marks, you need to show all calculations in good form.

Should the machine be repaired or replaced if The Auto expects to install 10,000 tires in the next two years?

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