Cocoa Beach Company Is Considering Replacing a Machine That Is

question 61

Multiple Choice

Cocoa Beach Company is considering replacing a machine that is presently used in the production of its product.The following data are available: $$\begin{array} { l r r } & \text { Old Machine } & \begin{array} { r } \text { Replacement } \\\text { Machine }\end{array} \\\text { Original cost } & \$ 200,000 & \$ 160,000 \\\text { Useful life in years } & 10 & 5 \\\text { Current age in years } & 5 & 0 \\\text { Book value } & \$ 100,000 & - \\\text { Disposal value now } & \$ 32,000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 20,000 & \$ 14,000\end{array}$$ Ignoring income taxes, the difference in cost between the old and new machine is _____.

• A)$98,000 in favor of the old machine
• B)$98,000 in favor of the new machine
• C)$40,000 in favor of the new machine
• D)$12,000 in favor of the new machine

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Definitions:

Performance Measurement

The process of evaluating and assessing an individual's or organization's work or performance against predefined objectives or standards.

Time Lag

The delay between a cause or action and its effect or outcome.

Competitive Benchmarking

A process where a company measures its performance or processes against those of its competitors to identify improvements or strategies.

Industry Benchmarking

A process of measuring a company's performance, operations, or processes against the best practices from other companies within the same industry.