Corner Cupcakes is considering the purchase of a new machine for its bakery. It can purchase the new machine at a cost of $10,000. For the existing machine, last year, the bakery spent $3,200 on machine repairs, an additional $1,900 on add-ons, and $2,700 for a software upgrade. How much of the given costs is relevant to the decision to purchase the new machine for the bakery?
A) $5,100
B) $7,800
C) $10,000
D) $17,800

Question

Quizplus · Accepted Answer

The cost(s) that is relevant to the decision to purchase the new machine for the bakery is $10,000 which is the purchase price of the new machine. The other costs, $3,200 for the machine repairs, the $1,900 for the add-one for the machine, and the $2,700 software upgrade for the machine are considered sunk costs since the occurred last year, and sunk costs are not relevant in the decision-making process.

Corner Cupcakes Is Considering the Purchase of a New Machine