Derwood Company Is Considering Replacing a Machine That Is Presently

question 37

Multiple Choice

Derwood Company is considering replacing a machine that is presently used in the production of its product. The following data are available: $$\begin{array} { l l l } & \text { Old Machine } & \begin{array} { l } \text { R eplacem } \\\text { M achine }\end{array} \\\text { Original cost } & \$ 99,000 & \$ 88,000 \\\text { Useful life in years } & 9 & 6 \\\text { Current age in years } & 3 & 0 \\\text { Book value } & \$ 33,000 & - \\\text { Disposal value now } & \$ 28,000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 17,000 & \$ 14,000\end{array}$$ is a sunk cost.

• A) The disposal value of the old machine
• B) The original cost of the old machine
• C) The annual cash operating costs of the replacement machine
• D) The annual cash operating costs of the old machine

---

Definitions:

Bloom's Taxonomy

A classification system used to define and distinguish different levels of human cognition—i.e., thinking, learning, and understanding.

Basic Needs

Fundamental requirements for human survival and well-being, including food, water, shelter, and safety.

Experience Success

The feeling of accomplishing a goal or achieving a desired outcome.

Effectively

In a manner that produces the intended result or a successful outcome.