When using the equivalent annual cost as a basis for deciding which equipment should be purchased,the equipment under consideration must fit which two of the following criteria?
I.differing productive lives
II.differing manufacturers
III.required replacement at end of economic life
IV.differing initial cost
A)I and II
B)I and III
C)I and IV
D)II and IIII
E)II and IV

Question

Quizplus · Accepted Answer

The equivalent annual cost is used to compare equipment options that have differing productive lives and require replacement at the end of their economic life. These criteria are met by option I and III in the list, which means that the answer is B. Differing manufacturers and initial cost are not relevant criteria for using the equivalent annual cost method.

When Using the Equivalent Annual Cost as a Basis for Deciding