Management of Plascencia Corporation Is Considering Whether to Purchase a New

question 20

Multiple Choice

Management of Plascencia Corporation is considering whether to purchase a new model 370 machine costing $525,000 or a new model 220 machine costing $423,000 to replace a machine that was purchased 8 years ago for $488,000. 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 $423,000 in the new machine, the money could be invested in a project that would return a total of $450,000.In making the decision to invest in the model 220 machine, the opportunity cost was:

• A) $488,000
• B) $423,000
• C) $525,000
• D) $450,000

---

Definitions:

Unstructured Questions

Open-ended questions that allow respondents to answer in their own words.

Data Warehousing

The electronic storage of a large amount of information by a business, organization, or government, centralized for easy access and analysis.

Purchase Histories

Records of an individual's or organization's past purchases, used for analyzing buying behavior or trends.

Sentiment Mining

Data gathered by evaluating customer comments posted through social media sites such as Facebook and Twitter.