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Depreciation is aa cost that cannot be affected by any future action. Oa. mixed cost Ob. sunk cost Oc. opportunity cost Od. step cost Oe. None of these choices are correct.
Abbott Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achleving the expected results. The following information is available: Expected maintenance costs of new machine Purchase price of existing machine Expected cost savings of new machine Expected maintenance costs of existing machine Resale value of existing machine $12,000 per year $150,000 $20,000 per year $8,000 per year $35,000 Which of these items is irrelevant? Da. Purchase cost of existing machine @b. Expected maintenance costs of existing machine c. Expected maintenance costs of new machine d. Expected resale value of existing machine Next Previous
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Answer #1

1.Ans:

b.Sunk Cost

Suck cost is a cost which is irrecoverable after incur..

If the asset is purchased, Depreciation is charged irrespective of whether asset is actually used in the business or not

2.Ans:

a)The purchase cost of existing machine is a sunk cost and is irrelevant in decision making.

The answer is a.

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