Brooklyn Bakers Brooklyn Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows:
Refer to Brooklyn Bakers.The $5,000 of annual operating costs that are common to both the old and the new machine are an example of a(n)
A)sunk cost.
B)irrelevant cost.
C)future avoidable cost.
D)opportunity cost.

Question

Brooklyn Bakers Brooklyn Bakers is trying to decide whether it should keep its existing bread-making machine or purchase a new one that has technological advantages (which translate into cost savings)over the existing machine.Information on each machine follows:
 Refer to Brooklyn Bakers.The $5,000 of annual operating costs that are common to both the old and the new machine are an example of a(n)
A)sunk cost. 
B)irrelevant cost. 
C)future avoidable cost. 
D)opportunity cost.

Quizplus · Accepted Answer

The $5,000 of annual operating costs that are common to both the old and the new machine are irrelevant costs because they do not affect the decision of whether to keep the existing machine or purchase a new one with technological advantages. The decision should be based on the additional costs and savings associated with the new machine compared to the existing one.

Brooklyn Bakers Brooklyn Bakers Is Trying to Decide Whether It