Fuller Industries Is Considering Replacing a Machine That Is Presently

question 187

Multiple Choice

Fuller Industries is considering replacing a machine that is presently used in its production process.Which of the following amounts represents a sunk cost? $\begin{array}{|l|r|c|} \hline& \text { Old Machine } & \begin{array}{c}\text { Replacement } \\\text { Machine }\end{array} \\\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \\\hline \text { Remaining useful life in years } & 5 & 5 \\\hline \text { Current age in years } & 5 & 0 \\\hline \text { Book value } & \$ 30,000 & \\\hline \text { Current disposal value in cash } & \$ 9000 & \\\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 0 \\\hline \text { Annual cash operating costs } & \$ 8000 & \$ 4500\\\hline\end{array}$

• A) $55,000
• B) $30,000
• C) $9000
• D) $45,000

Understand the treatment and reporting of corporate income tax liabilities.

Distinguish between current and noncurrent liabilities.

Grasp the relationship between liabilities and business operations, including the settlement of obligations.

Understand the definitions and distinctions between current and long-term liabilities.

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Definitions:

Product Life Cycle

The stages a product goes through from introduction to growth, maturity, and decline in the market.

Niche Segment

A specialized market segment focused on a specific group of consumers with particular interests, needs, or demographic characteristics.

Diehard Consumers

Consumers who are extremely loyal to a brand, product, or service, often in spite of other options or changes in the market.

Late Majority

A segment of consumers in the diffusion of innovation model, who adopt new products or technologies after the average consumer.