Jeannie Company Is Considering Replacing a Machine That Is Presently

question 42

Multiple Choice

Jeannie Company is considering replacing a machine that is presently used in the production of its product. The following data are available: $\begin{array}{lll}&& \text { Replacement } \\&\text { Old Machine } & \text { Machine }\\\text { Original cost } & \$ 333,000 & \$ 222,000 \\\text { Useful life in years } & 6 & 5 \\\text { Current age in years } & 1 & 0 \\\text { Book value } & \$ 198,000 & - \\\text { Disposal value now } & \$ 132,000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating } & \$ 45,000 & \$ 34,000\\\text {costs}\end{array}$ is a sunk cost.

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

---

Definitions:

Pythagoras

A Greek mathematician.

Vector

A line having a specific length and direction.

Magnitude

A numerical value assigned to the size or amount of a physical quantity (such as force, mass, or electric current) without regard to its direction.

Direction

A course along which someone or something moves.