Question: The machines shown below are under consideration for an improvement to an automated candy bar wrapping process. Machine C Machine D First cost, $ 50,000

The machines shown below are under consideration for an improvement to an automated candy bar wrapping process.

Machine C

Machine D

First cost, $

50,000

65,000

Annual cost, $/year

10,000

15,000

Salvage value, $

12,000

25,000

Life, years

4

7

(Source: Blank and Tarquin)

9.) Machine C and Machine D are two mutually exclusive alternatives.

Which machine should be selected on the basis of the Annual Worth Analysis?

(Review the criteria to select mutually exclusive alternatives based on Annual Worth Analysis)

  1. Recommend Machine C with AWC= $15,096
  2. Recommend Machine C with AWC= $22,433
  3. Recommend Machine D with AWD= $19,683
  4. Recommend Machine D with AWD= $24,683

10.) If Machine C and Machine D were independent projects, the correct selection based on the Annual Worth calculated for each machine would be:

(Review criteria to select independent projects based on the Annual Worth Analysis)

  1. Install Machine C
  2. Install Machine D
  3. Install both, Machine C and Machine D
  4. Select the Do Nothing alternative

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