Sala Cois Contemplating the Replacement of an Old Machine with a a New

question 22

Multiple Choice

Sala Co.is contemplating the replacement of an old machine with a new one.The following information has been gathered: $\begin{array}{lrr}&\text { Old Machine }&\text { New Machine }\\\text { Price } & \$ 300,000 & \$ 600,000 \\\text { Accumulated Depreciation } & 90,000 & -0- \\\text { Remaining useful life } & 10 \text { years } & -0- \\\text { Useful life } & -0- & 10 \text { years } \\\text { Annual operating costs } & \$ 240,000 & \$ 180,600\end{array}$ If the old machine is replaced, it can be sold for $24,000. Which of the following amounts is a sunk cost?

• A)$240,000
• B)$180,600
• C)$600,000
• D)$210,000

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Definitions:

Mills

Factories or plants that process and manufacture products from raw materials.

Marginal Returns

The additional output produced as a result of utilizing one more unit of input, which can decrease as more units are added.

Labor

The physical and mental effort used in the production of goods and services.

Capital

Resources or assets that are used in the production of goods and services, including physical assets like machinery and buildings, and intangible assets like patents.