Abbott Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achieving the expected results.The following information is available: Which of these items is IRRELEVANT?
A) Expected maintenance costs of new machine
B) Purchase cost of existing machine
C) Expected maintenance costs of existing machine
D) Expected resale value of existing machine

Question

Abbott Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achieving the expected results.The following information is available:  Which of these items is IRRELEVANT?
A) Expected maintenance costs of new machine 
B) Purchase cost of existing machine 
C) Expected maintenance costs of existing machine 
D) Expected resale value of existing machine

Quizplus · Accepted Answer

The purchase cost of the existing machine is irrelevant because the decision to replace the machine is based on its performance and not the initial purchase cost. The decision should be based on the expected maintenance costs of both machines and the expected resale value of the existing machine.

Abbott Company Is Considering Purchasing a New Machine to Replace