Fletcher Company Is Trying to Decide Whether to Trade in Equipment

question 91

Essay

Fletcher Company is trying to decide whether to trade in equipment used in its manufacturing process for a newer model.The new equipment will save money because it will be more efficient to use.Indicate if the following items are relevant or irrelevant to this decision.
$$\begin{array} { | l | l | } \hline \text { Item } & \begin{array} { c } \text { Relevant or } \\\text { Irrelevant }\end{array} \\\hline \text { The price of the new equipment } & \\\hline \text { The price paid for the old equipment } & \\\hline \text { The trade in value of the old equipment } & \\\hline \text { The repair costs that will be incurred if the old } \\\text { equipment is kept } & \\\hline \text { The expected cost savings of the new equipment } & \\\hline \text { The costs that have been incurred on the old equipment } & \\\hline\end{array}$$

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Definitions:

Price Decreases

A reduction in the cost at which goods and services are sold, typically influencing demand.

Marginal Utility

The additional satisfaction or utility a consumer gains from consuming one more unit of a good or service.

Video Game Rental

A service that allows consumers to borrow video games for a limited period of time for a fee.

Total Utility

The total satisfaction a product yields.