The Role of the Accountant in Equipment Replacement Analysis.

Abstract The purpose of the article is to present steps that can be taken by an accounting department to make a positive contribution to the implementation of a sound equipment policy. The most effective manner of doing this is probably to begin with a presentation of the prerequisites for any sound equipment policy and then to continue with a determination of what the accountant can supply toward the satisfaction of these prerequisites. Equipment policy can be defined as being the framework within which a company formulates an approach to equipment acquisition. More specifically, it is the system to which management adheres in determining which of a number of available units of production equipment shall be selected to manufacture the company's product. The accounting departments in a few of these firms have established procedures which enable them to issue monthly or annual reports showing the number of hours each machine was in operation during the period covered by the report. The analyst, studying a particular machine for possible replacement, is then able to review these records and determine the existing facility's past average operating rate. This provides some clue of what the operating rate may be in the future. It may be necessary to modify historical figures to reflect anticipated changes in the future, but at least a tangible starting point has been provided by the accountant.