Fuller Industries is considering replacing a machine that is presently used in its production process.Which of the following amounts represents a sunk cost? $\begin{array}{|l|r|r|}
\hline& \text { Old Machine } & \begin{array}{c}
\text { Replacement } \
\text { Machine }
\end{array} \
\hline \text { Original cost } & \$ 60,000 & \$ 46,000 \
\hline \text { Remaining useful life in years } & 5 & 5\\hline \text { Current age in years } & 5&0 \
\hline \text { Book value } & \$ 33,000 \\hline \text { Current disposal value in cash } & \$ 9000 & \
\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 0 \
\hline \text { Annual cash operating costs } & \$ 8000 & \$ 4500 \
\hline
\end{array}$

Question

Fuller Industries is considering replacing a machine that is presently used in its production process.Which of the following amounts represents a sunk cost? $\begin{array}{|l|r|r|} 
\hline& \text { Old Machine } & \begin{array}{c}
\text { Replacement } \
\text { Machine }
\end{array} \
\hline \text { Original cost } & \$ 60,000 & \$ 46,000 \
\hline \text { Remaining useful life in years } & 5 & 5\\hline \text { Current age in years } & 5&0 \
\hline \text { Book value } & \$ 33,000 \\hline \text { Current disposal value in cash } & \$ 9000 & \
\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 0 \
\hline \text { Annual cash operating costs } & \$ 8000 & \$ 4500 \
\hline
\end{array}$

Quizplus · Accepted Answer

The original cost of the old machine ($60,000) is a sunk cost because it has already been incurred and cannot be recovered.

Fuller Industries Is Considering Replacing a Machine That Is Presently