Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision?
$$\begin{array} { | l | r | r | }
\hline & \text { Old Machine } & \begin{array} { l }
\text { Replacement } \
\text { Machine }
\end{array} \
\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \
\hline \text { Remaining useful life in years } & 5 & 5 \
\hline \text { Current age in years } & 5 &0 \
\hline \text { Book value } & \$ 33,000 & \
\hline \text { Current disposal value in cash } & \$ 9000 & \$ 0 \
\hline \text { Auture disposal value in cash (in 5 years) } & \$ 8000 & \$ 4500 \
\hline
\end{array}$$ Which of the information provided in the table is irrelevant to the replacement decision?

Question

Bradley Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision?
$$\begin{array} { | l | r | r | } 
\hline & \text { Old Machine } & \begin{array} { l } 
\text { Replacement } \
\text { Machine }
\end{array} \
\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \
\hline \text { Remaining useful life in years } & 5 & 5 \
\hline \text { Current age in years } & 5 &0 \
\hline \text { Book value } & \$ 33,000 & \
\hline \text { Current disposal value in cash } & \$ 9000 & \$ 0 \
\hline \text { Auture disposal value in cash (in 5 years) } & \$ 8000 & \$ 4500 \
\hline
\end{array}$$ 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 irrelevant to the replacement decision as it is a sunk cost and cannot be recovered regardless of whether the company decides to replace the machine or not. The sales price of the new machine, the current disposal value of the old machine, and the annual cash operating costs for both machines are all relevant factors to consider in the replacement decision.

Bradley Industries Is Considering Replacing a Machine That Is Presently