In an equipment replacement decision the cost of the old equipment is an a

In an equipment replacement decision the cost of the

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133.In an equipment replacement decision, the cost of the old equipment is a(n)a.incremental cost.b.sunk cost.c.relevant cost.d.opportunity cost.Ans: B, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: ProblemSolving, IMA: Business Economics134.Chung Inc. is considering the replacement of a piece of equipment with a newer model.The following data has been collected:Old EquipmentNew EquipmentPurchase price$225,000$375,000Accumulated depreciation90,000- 0 -Annual operating costs300,000240,000If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’sremaining useful life and the new equipment’s useful life is 5 years.Which of the following amounts is irrelevant to the replacement decision?135.Chung Inc. is considering the replacement of a piece of equipment with a newer model.The following data has been collected:Old EquipmentNew EquipmentPurchase price$225,000$375,000Accumulated depreciation90,000- 0 -Annual operating costs300,000240,000If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’sremaining useful life and the new equipment’s useful life is 5 years.What is the net cost of the new equipment?21 - 31
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136.Chung Inc. is considering the replacement of a piece of equipment with a newer model.The following data has been collected:Old EquipmentNew EquipmentPurchase price$225,000$375,000Accumulated depreciation90,000- 0 -Annual operating costs300,000240,000If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment’sremaining useful life and the new equipment’s useful life is 5 years.The net advantage (disadvantage) of replacing the old equipment with the new equipment is
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