Madison Optometry Is Considering the Purchase of a New Lens

question 63

Essay

Madison Optometry is considering the purchase of a new lens grinder to replace a machine that was purchased several years ago.Selected information on the two machines is given below:

$\begin{array}{l}\begin{array}{lll}\\ \\\text {Original cost when new}\\\text {Accumulated depreciation to date}\\\text {Current salvage value}\\\text {Annual operating cost}\\\text {Remaining useful life}\\\end{array}\begin{array}{lll}\text { OId} &\text { New} \\\text { Machine } &\text { Machine } \\ \$ 80,000 & \$ 85,000 \\32,000 & ---\\26,000 &--- \\4,000 & 3,000 \\4 \text { years } & 4 \text { years}\end{array}\end{array}$

Ignore income taxes and the time value of money in this problem.

Required:

Compute the total advantage or disadvantage of using the new machine instead of the old machine over the next four years.

Identify the creation of various utilities (form, time, place, quantity) in logistics activities.

Recognize the balance necessary between different logistics activities such as warehousing, transportation, and procurement.

Understand the relationship between product characteristics (value, weight density) and logistics costs (packaging, transportation).

Comprehend the role of logistics in creating customer value through time and place utility.

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Definitions:

Total Profits

The entirety of financial gains earned by a business after subtracting all costs and expenses from total revenues.

Advertising Costs

Costs associated with marketing a product, service, or brand to prospective buyers.

Profit Function

A mathematical representation showing the relationship between a firm's profits and its output or other relevant variables.

Advertising Costs

Expenses incurred in promoting a product or service to potential customers through various media channels.