Management of Plascencia Corporation Is Considering Whether to Purchase a New

question 77

Multiple Choice

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $360,000 or a new model 220 machine costing $340,000 to replace a machine that was purchased 7 years ago for $348,000. The old machine was used to make product I43L until it broke down last week. Unfortunately, the old machine cannot be repaired.Management has decided to buy the new model 220 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product I43L.Management also considered, but rejected, the alternative of simply dropping product I43L. If that were done, instead of investing $340,000 in the new machine, the money could be invested in a project that would return a total of $411,000.In making the decision to buy the model 220 machine rather than the model 370 machine, the sunk cost was:

• A) $348,000
• B) $340,000
• C) $360,000
• D) $411,000

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Definitions:

Red Army

The army and the air force of the Russian Soviet Federative Socialist Republic, and after 1922, the Union of Soviet Socialist Republics (USSR), before it was replaced by the Soviet Army.

Jewish-American Organizations

Groups within the United States that represent or serve the interests of the Jewish community through cultural, religious, or political initiatives.

Death Camps

Facilities established primarily during World War II by Nazi Germany for the systematic extermination of millions of people, mainly Jews, through mass killings.

Military Production Policies

Government-directed strategies and regulations for the production of military equipment, supplies, and arms to support defense efforts.