Question

You are considering the purchase of one of two machines used in your manufacturing plant. Machine A has a life of two years, costs $1500 initially, and then $400 per year in maintenance costs. Machine B costs $2000 initially, has a life of three years, and requires $300 in annual maintenance costs. Either machine must be replaced at the end of its life with an equivalent machine.

what is the cost of repairs for machine A if you keep it for three years?

Answer 1

The cost of repairs for machine A if kept for three years would amount to $800 for maintenance, with an additional $1900 for replacing the machine and its maintenance in the third year, totaling $2700 over the three-year period.

Step-by-step explanation:

The cost of repairs for machine A over three years would be $800. This is because machine A, with a life of two years, must be replaced at the end of its life. Thus, for three years, you will incur the initial cost once, maintenance for two years, and then purchase a new machine for the third year along with that year's maintenance costs.

In the first two years, machine A requires $800 in maintenance ($400 per year). At the end of the second year, machine A will be replaced, costing another $1500 for the new machine along with another year of maintenance, totaling $1900 for the third year. This calculation does not include the initial $1500 cost, as we are only considering the repair and maintenance costs over the three-year period.