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 estimated $650 salvage value of the existing machine in 10 years represents a(n)
A)sunk cost.
B)opportunity cost of selling the existing machine now.
C)opportunity cost of keeping the existing machine for 10 years.
D)opportunity cost of keeping the existing machine and buying the new machine.

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 estimated $650 salvage value of the existing machine in 10 years represents a(n)
A)sunk cost. 
B)opportunity cost of selling the existing machine now. 
C)opportunity cost of keeping the existing machine for 10 years. 
D)opportunity cost of keeping the existing machine and buying the new machine.

Quizplus · Accepted Answer

The salvage value of the existing machine represents the opportunity cost of selling it now. It is not a sunk cost because it is a future potential value that can be realized if the machine is sold. Therefore, it should be considered in the decision-making process. As for the best choice between keeping the existing machine and buying the new one, further information such as the cost savings of the new machine, the maintenance and repair costs of the existing machine, and the potential increase in productivity and quality of the new machine are needed to make a decision.

Brooklyn Bakers Brooklyn Bakers Is Trying to Decide Whether It