When deciding to lease a new cutting machine or continue using the old machine,the following costs are relevant EXCEPT the:
A)$10 000 selling price of the old machine.
B)$20 000 cost of the new machine.
C)$3000 annual savings in operating costs if the new machine is purchased.
D)$50 000 cost of the old machine.

Question

Quizplus · Accepted Answer

The cost of the old machine ($50,000) is a sunk cost, meaning it has already been incurred and cannot be recovered or changed by the decision to lease a new machine or continue using the old one. Therefore, it is not relevant to the decision-making process.

When Deciding to Lease a New Cutting Machine or Continue