Question

15 Management of Plascencia Corporation ts considerning whether to purchase a new model 370 machine costing S new model 220 machine costing $A23000 to replace a machne t machine was used to make product l43L until t troke down last Unfotunaten. he machine trot that was purchased 8 years ago for $488,000 The okd Management has decided to buy the new model 220 machine. It has less capacity than the new mo capacity is sufficient to continue making product 143 del 370 machine, but its ent also considered, but rejected, the alternative of simply droppng product 143L. Ir that were done, instead of new machine, the money could be invested in a project that would return a total of $450,000 investing $423,000 in the n making the decision to buy the model 220 machine rather than the model 370 machine, the sunk cost was:

Answer 1

Sunk cost is the cost which is incurred in past..

Like old machine cost which is incurred in past..

In this question sunk cost is $488000..

So answer is a) $488000