Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision?
$\begin{array}{|l|r|c|}
\hline& \text { Old Machine } & \begin{array}{c}
\text { Replacement } \
\text { Machine }
\end{array} \
\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \\hline \text { Remaining useful life in years } & 5 & 5 \
\hline \text { Current age in years } & 5 & 0 \
\hline \text { Book value } & \$ 33,000 & \\hline \text { Current disposal value in cash } & \$ 9000 & \
\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 0 \
\hline \text { Annual cash operating costs } & \$ 8000 & \$ 4500\
\hline
\end{array}$ Which of the information provided in the table is irrelevant to the replacement decision?

Question

Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision?
$\begin{array}{|l|r|c|} 
\hline& \text { Old Machine } & \begin{array}{c}
\text { Replacement } \
\text { Machine }
\end{array} \
\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \\hline \text { Remaining useful life in years } & 5 & 5 \
\hline \text { Current age in years } & 5 & 0 \
\hline \text { Book value } & \$ 33,000 & \\hline \text { Current disposal value in cash } & \$ 9000 & \
\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 0 \
\hline \text { Annual cash operating costs } & \$ 8000 & \$ 4500\
\hline
\end{array}$ Which of the information provided in the table is irrelevant to the replacement decision?

Quizplus · Accepted Answer

The original cost of the old machine is irrelevant to the replacement decision because it is a sunk cost. Sunk costs are costs that have already been incurred and cannot be recovered. Therefore, they should not be considered when making a replacement decision.

Bradley Industries Is Considering Replacing a Machine That Is Presently