Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available: Which of the information provided in the table is irrelevant to the replacement decision?

Question

Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available:  Which of the information provided in the table is irrelevant to the replacement decision?

Quizplus · Accepted Answer

The original cost of the old machine is a sunk cost and is irrelevant to the replacement decision. The decision should be based on the current and future costs and benefits, rather than the costs incurred in the past. Therefore, option B is irrelevant, while A, C, and D are all relevant factors to be considered in the decision making process.

Smith Industries Is Considering Replacing a Machine That Is Presently