oncord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the achine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a 12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company urrently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per ear. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book alue of $5,000. The new machine is expected to have a salvage value of $19.900 at the end of its ten-year life. Concord Pix uses traight-line depreciation.
oncord Pix currently uses a six-year-old molding machine to manufacture silver picture frames. The company paid $95,000 for the achine, which was state of the art at the time of purchase. Although the machine will likely last another ten years, it will need a 12,000 overhaul in four years. More important, it does not provide enough capacity to meet customer demand. The company urrently produces and sells 9,000 frames per year, generating a total contribution margin of $92,500. Martson Molders currently sells a molding machine that will allow Concord Pix to increase production and sales to 12,000 frames per ear. The machine, which has a ten-year life, sells for $135,000 and would cost $10,000 per year to operate. Concord Pix's current machine costs only $8,000 per year to operate. If Concord Pix purchases the new machine, the old machine could be sold at its book alue of $5,000. The new machine is expected to have a salvage value of $19.900 at the end of its ten-year life. Concord Pix uses traight-line depreciation.
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 16PB: At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The...
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