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: $\begin{array}{ll}
\text { Expected maintenance costs of new machine } & \$ 12,000 \text { per year } \
\text { Purchase price of existing machine } & \$ 150,000 \
\text { Expected cost savings of new machine } & \$ 20,000 \text { per year } \
\text { Expected maintenance costs of existing machine } & \$ 8,000 \text { per year } \
\text { Resale value of existing machine } & \$ 35,000
\end{array}$
Which of these items is irrelevant?

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: $\begin{array}{ll}
\text { Expected maintenance costs of new machine } & \$ 12,000 \text { per year } \
\text { Purchase price of existing machine } & \$ 150,000 \
\text { Expected cost savings of new machine } & \$ 20,000 \text { per year } \
\text { Expected maintenance costs of existing machine } & \$ 8,000 \text { per year } \
\text { Resale value of existing machine } & \$ 35,000
\end{array}$
 Which of these items is irrelevant?

Quizplus · Accepted Answer

The purchase cost of the existing machine is irrelevant because the decision is regarding the purchase of a new machine to replace the existing one. The focus should be on the cost and benefits of the new machine, not the cost of the old machine.

Abbott Company Is Considering Purchasing a New Machine to Replace