A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?
A)the book value of the old equipment
B)depreciation expense on the old equipment
C)the loss on the disposal of the old equipment
D)the current disposal price of the old equipment

Question

Quizplus · Accepted Answer

The relevant cost in this situation is the current disposal price of the old equipment, as it represents the opportunity cost of not selling the equipment and keeping it in service. The book value, depreciation expense, and loss on disposal are all irrelevant costs as they are sunk costs and do not affect the decision of whether or not to replace the machine.

A Company Decided to Replace an Old Machine with a New