Final answer:
The plant upgrade option that reduces production run setup costs by 50 each year and costs 8 million of plant capacity and causes depreciation costs to rise by 5% merits immediate consideration by company managers when the benefits outweigh the costs.
Step-by-step explanation:
The plant upgrade option that reduces production run setup costs by 50 each year and costs 8 million of plant capacity, causing depreciation costs to rise by 5%, merits immediate consideration by company managers when the benefits outweigh the costs. This decision can be evaluated by analyzing the impact on overall production costs and potential savings over time.
To determine whether the upgrade option should be considered immediately, the company managers need to compare the annual reduction in production run setup costs to the increased depreciation costs. If the reduction in setup costs exceeds the increase in depreciation costs, the upgrade option is financially beneficial. However, if the increase in depreciation costs outweighs the savings from reduced setup costs, the upgrade option may not be justified at this time.