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:

Which of these items is irrelevant?

A) Expected maintenance costs of new machine
B) Purchase cost of existing machine
C) Expected maintenance costs of existing machine
D) Expected resale value of existing machine

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:

Which of these items is irrelevant?

A) Expected maintenance costs of new machine 
B) Purchase cost of existing machine 
C) Expected maintenance costs of existing machine 
D) Expected resale value of existing machine

Quizplus · Accepted Answer

The purchase cost of the existing machine is irrelevant because the decision to replace it has already been made. The focus now is on comparing the expected costs and benefits of the new machine versus the existing machine. Therefore, the purchase cost of the existing machine, which is a sunk cost, should not be factored into this decision.

Abbott Company Is Considering Purchasing a New Machine to Replace