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hello there in this video well go through a basic equipment replacement decision that is common in management accounting relevant costing so heres the data for our problem at the beginning of 2020 a professional center installed an elevator in a building the owner of the building returned from an industry trade show where she saw a new advanced elevator which greatly impressed her because of speed and cost efficiency so upon her return she asked the building manager to gather price and operating cost data as well as operating cost data on the existing elevator so heres what we have an existing elevator an advanced elevator the purchase price of the existing elevator last year was 120 000 and if the new elevator was purchased itd be 160 the useful life of the old elevator from when it was purchased is five years and the new one will have a useful life of four years and the annual operating costs excluding depreciation include fixed and variable so 35 000 variable for the existing el