Chapter 12 Full Student Version [Read-Only]

Chapter 12 Full Student Version[Read-Only]

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: s are irrelevant costs. • • • • • Two broad categories of costs are never relevant in any decision. They include: • • Sunk Sunk costs. Future Future costs that do not differ between the alternatives. do • Old machine cost $4,200 when purchased Old machine has a book value of $2,100 Purchase price of a new machine is $7,000 New machine is expected to last two years Repairs to old machine would be $3,500 and would allow two more years of productivity Power for either machine is expected to be $2.50 New machine will reduce labor costs from $10 to $9.5 per hour Expected labor level per year: 1,000 hours with either machine 12-7 Relevant Costs: Purchase (replace) vs. repair The The items left are relevant costs (information): • • • • • • • • Old machine cost $4,200 when purchased Old machine has a book value of $2,100 Purchase price of a new machine is $7,000 New machine is expected to last two years Repairs to old machine would be $3,500 and would allow two two more years of productivity Power for either machine...
View Full Document

This note was uploaded on 04/01/2014 for the course RSM 222 taught by Professor D.cianflone during the Winter '10 term at University of Toronto- Toronto.

Ask a homework question - tutors are online