A Local Learning Center Is Considering Replacing the Computers in Its

question 28

Essay

A local learning center is considering replacing the computers in its facility with thin client technology,thereby eliminating the need for individual computers at each station in the lab.The cost to purchase and install this new technology is $450,000 and it is projected to last for six years.The existing computers have a book value of $70,000 and a market value of $18,000 if they were to be sold.They expect to save a fair amount of money in maintenance costs and software upgrades if they go to the new technology.
Required:
a.What would the annual savings have to be in order to warrant the replacement of the existing computers with the thin client technology?
b.What would the annual savings have to be in order to warrant the replacement of the existing computers with the thin client technology if the existing computers have no current market value?

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Definitions:

Financial Advantage

The benefit gained in financial terms that gives an individual or entity a better position compared to others.

Production Run

A specific period or batch of production where goods are manufactured continuously, often tracked to analyze efficiencies and costs.

Relevant Costs

Costs that are directly influenced by a specific business decision, and are crucial for cost-effective management decisions.

Differential Cost

A future cost that differs between any two alternatives.