Mountain Gear Has Been Using the Same Machines to Make

question 76

Multiple Choice

Mountain Gear has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $100,000. The old machines presently have a book value of $60,000 and a market value of $6,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $50,000 and have operating expenses of $9,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $15,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $5,000 a year. Select the true statement.

• A)The company will be $11,000 better off over the 5-year period if it replaces the old equipment.
• B)The company will be $20,000 better off over the 5-year period if it keeps the old equipment.
• C)The company will be $12,000 better off over the 5-year period if it replaces the old equipment.
• D)The company will be $6,000 better off over the 5-year period if it replaces the old equipment.

---

Definitions:

PLCs

Specialized computers, known as Programmable Logic Controllers, are utilized for managing and controlling machines and processes in the industrial sector.

Relay-Type

Relay-Type control systems use electromechanical relays for switching operations in electrical circuits, offering physical isolation and power amplification.

Output Interface Module

A component within an automation system that processes control signals from a PLC or processor to drive external devices.

Load Devices

Equipment or components that consume electrical power in a circuit, typically transforming it into another form of energy like light, heat, or motion.