A company is deciding whether to purchase production equipment which can produce units more quickly than the current equipment. Which of the following costs would be relevant to its decision?
A)The original purchase price of the current machinery
B)The additional labor required to run the new equipment
C)The accumulative repairs costs of the current machinery over the years
D)The cost of raw materials

Question

Quizplus · Accepted Answer

The additional labor required to run the new equipment is a relevant cost as it will impact the company's profitability and productivity. The original purchase price of the current machinery and the accumulative repairs cost of the current machinery over the years are sunk costs and are not relevant to this decision. The cost of raw materials is also not relevant to this decision as it will not be affected by the purchase of new equipment.

A Company Is Deciding Whether to Purchase Production Equipment Which