# Hrm 500: equipment replacement decisions and performance evaluation

HRM 500: Equipment replacement decisions and performance evaluation

Bob Moody manages the Knoxville plant of George Manufacturing. He has been approached by a representative of Darda Engineering regarding the possible replacement of a large piece of manufacturing equipment that George uses in its process with a more efficient model. While the representative made some compelling arguments in favor of replacing the 3-year old equipment, Moody is hesitant. Moody is hoping to be promoted next year to manager of the larger Chicago plant, and he knows that the accrual-basis net operating income of the Knoxville plant will be evaluated closely as part of the promotion decision. The following information is available concerning the equipment replacement decision:

• The historic cost of the old machine is \$300,000. It has a current book value of \$120,000, two remaining years of useful life, and a market value of \$72,000. Annual depreciation expense is \$60,000. It is expected to have a salvage value of \$0 at the end of its useful life.
• The new equipment will cost \$180,000. It will have a two-year useful life and a \$0 salvage value. George uses straight-line depreciation on all equipment.
• The new equipment will reduce electricity costs by \$35,000 per year, and will reduce direct manufacturing labor costs by \$30,000 per year.

For simplicity, ignore income taxes and the time value of money.

Required

1. Assume that Moody’s priority is to receive the promotion, and he makes the equipment replacement decision based on next year’s accrual-based net operating income. Which alternative would he choose? Show your calculations.
2. What are the relevant factors in the decision? Which alternative is in the best interest of the company over the next two years? Show your calculations.

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.