66) The total relevant costs to consider if the old machine is kept are

A) $120,000.

B) $70,000.

C) $94,000.

D) $144,000.

67) The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is

A) $74,000 in favour of keeping the old machine.

B) $24,000 in favour of keeping the old machine.

C) $74,000 in favour of replacing the old machine.

D) $24,000 in favour of replacing the old machine.

Buckner Company is considering replacing a machine that is presently used in the production of its product. The following data are available:

Replacement

Old Machine

Machine

Original cost

$360,000

$280,000

Useful life in years

         10

          5

Current age in years

          5

          0

Book value

$200,000

           –

Disposal value now

$64,000

           –

Disposal value in 5 years

          0

          0

Annual cash operating costs

$56,000

$  32,000

68) Which of the data provided in the table is irrelevant?

A) The original cost of the replacement machine

B) The disposal value of the old machine

C) The book value of the old machine

D) The annual operating cost of the old machine

69) Which of the data provided in the table is a sunk cost?

A) The disposal value of the old machine

B) The original cost of the old machine

C) The annual cash operating costs of the old machine

D) The annual cash operating costs of the replacement machine

70) The total relevant costs to consider if the old machine is kept are

A) $480,000.

B) $280,000.

C) $376,000.

D) $576,000.

The Enger Company is contemplating replacing some old equipment. The pertinent information is as follows:

Replacement

Old Machine

Machine

Original cost

$50,000

$36,000

Useful life in years

        20

          8

Current age in years

          12

          0

Book value

$30,000

           –

Disposal value now

$7,500

           –

Disposal value in 8 years

          0

          0

Annual cash operating costs

$14,000

$  7,500

71) Which of the data provided in the table is a sunk cost?

A) The annual cash operating costs of the old equipment

B) The annual cash operating costs of the replacement equipment

C) The disposal value of the old equipment

D) The original cost of the old equipment

72) The total relevant costs to consider if the old equipment is replaced are

A) $58,500.

B) $118,500.

C) $ 88,500.

D) $112,000.

73) The difference in cost between keeping the old equipment and replacing the old equipment, ignoring income taxes, is

A) $23,500 in favour of replacing the old equipment.

B) $23,500 in favour of keeping the old equipment.

C) $6,500 in favour of keeping the old equipment.

D) $6,500 in favour of replacing the old equipment.

74) A cost that has already been incurred and is irrelevant to the decision-making process is a(n)

A) opportunity cost.

B) replacement cost.

C) outlay cost.

D) sunk cost.

75) The gain or loss on the disposal of equipment is determined by

A) adding the book value of the old equipment to the cost of the new equipment.

B) adding the disposal value and the book value of the old equipment.

C) subtracting the book value from the disposal value of the old equipment.

D



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