Ernie Company is considering replacing a machine that is currently used in the production process.The ________ is irrelevant to the replacement decision.
A)cost of the new machine
B)disposal value of old machine
C)book value of old machine
D)annual operating cost of old machine

Question

Quizplus · Accepted Answer

The book value of the old machine is irrelevant because it is a sunk cost and does not affect the future cash flows of the company. The cost of the new machine, disposal value of the old machine, and annual operating cost of the old machine are all relevant factors to consider in the replacement decision.

Ernie Company Is Considering Replacing a Machine That Is Currently