An investment centre manager is considering the purchase of a new machine. If purchased, the new machine would replace an existing one that is used to manufacture one of the investment centre's existing products.
The new machine would incur $800 per month additional running costs; this includes $300 per month of additional depreciation.
The new machine would save on direct labor time. This means that the fixed production overhead absorbed by the product on the basis of direct labor hours would reduce by $100 per month.
What is the total cost of the above that is relevant to the decision to purchase the machine?
Submit