Which of the following cost is relevant to an equipment replacement decision?
A) cost of old equipment
B) cost of new equipment
C) book value of old equipment
D) depreciation expense on old equipment

Question

Quizplus · Accepted Answer

The cost of new equipment is relevant to the decision as it represents the cash outflow required to acquire the replacement equipment. The cost of old equipment, book value of old equipment, and depreciation expense on old equipment are not relevant costs as they are sunk costs and do not represent future cash flows.

Which of the Following Cost Is Relevant to an Equipment