A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?
A) The book value of the old equipment
B) Depreciation expense of the old equipment
C) The loss on disposal of the old equipment
D) The current disposal price of the old equipment

Question

Quizplus · Accepted Answer

The current disposal price of the old equipment is a relevant cost as it represents the cash outflow that the company will incur as a result of replacing the old machine with the new one. The book value, depreciation expense, and loss on disposal are all sunk costs and therefore not relevant to the decision to replace the machine.

A Company Decided to Replace an Old Machine with a New