Williams Auto has a machine that installs tires. The machine is now in need of repair. The machine originally cost $10,800 and the repair will cost $1,800, but the machine will then last two years. The labor cost of operating the machine is $0.75 per tire. Instead of repairing the old machine, Williams could buy a new machine at a cost of $5,800 that would also last two years; the labor cost would then be reduced to $0.55 per tire. Williams expects to install 10,800 tires in the next two years.

Required:

a. Determine the total (two-years) cost for both repairing and replacing the machine.

b. Should Williams repair or replace the machine?

multiple choice

• Repair

• Replace