Maldovar Company Is Considering Purchasing a New Machine to Replace

question 96

Multiple Choice

Maldovar Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achieving the expected results. The following information is available: $\begin{array}{lr}\text { Expected maintenance costs of new machine } & \$ 12,000 \text { per year } \\\text { Purchase price of existing machine } & \$ 150,000 \\\text { Expected cost savings of new machine } & \$ 20,000 \text { per year } \\\text { Expected maintenance costs of existing machine } & \$ 8,000 \text { per year } \\\text { Resale value of existing machine } & \$ 35,000\end{array}$ Which of these items is IRRELEVANT?

• A)Expected maintenance costs of new machine
• B)Expected maintenance costs of existing machine
• C)Purchase cost of existing machine
• D)Expected resale value of existing machine

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Definitions:

Legal Constraints

Restrictions imposed by laws and regulations that dictate how a business can operate.

Profit Making

The primary goal of businesses, which involves generating revenue that exceeds the costs of operating, leading to financial gain.

Instrumental Value

The worth or usefulness of something based on its ability to help achieve an end or a goal.

U.S. Managers

Individuals in managerial positions within companies based in the United States, responsible for directing and overseeing the operations and strategic planning of their respective organizations.