A company is considering replacing old equipment with new equipment.Which of the following is a relevant cost for incremental analysis?
A)total accumulated depreciation of the old equipment
B)cost of the old equipment
C)annual operating cost of the new equipment
D)book value of the old equipment

Question

Quizplus · Accepted Answer

The relevant cost for incremental analysis would be the annual operating cost of the new equipment, as this cost would affect the company's future cash flows and decision-making. The total accumulated depreciation, cost, and book value of the old equipment are historical and sunk costs that are not relevant for future decision-making.

A Company Is Considering Replacing Old Equipment with New Equipment