Bend Manufacturers Is Considering Investing in a New Truck That

question 139

Multiple Choice

Bend Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture.The truck currently used by Bend cost the company $72,000 eight years ago.Two years from now, the company anticipates spending $20,000 to overhaul the old truck, at which time the truck could be used for an additional 10 years.The old truck costs $8,000 per month in gas, insurance, and other costs to operate.Ron Shop, Controller of Bend Manufacturers, is considering the purchase of a new truck which will cost $100,000 and which has a useful life of 10 years.The new truck will only cost $4,800 per month to operate but will require an overhaul 8 years from now that is expected to cost $8,000.Ron believes the old truck can be sold for $16,000.If the new truck is purchased, he estimates that the new truck could be sold for $28,000 at the end of its useful life.Which of the following is not a relevant cash flow in the decision to replace the truck?

• A)$3,200 per month in operating cost savings
• B)$20,000 overhaul avoided on old truck
• C)$72,000 purchase price of old truck
• D)$16,000 salvage value of old truck

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Definitions:

Discriminating Firms

Companies that differentiate among customers, employees, or others based on certain criteria, often leading to unfair treatment.

Maximize Profits

The process or strategy where a business aims to achieve the highest possible profit margin within its operation, considering constraints and market conditions.

Discriminatory Wage Differentials

Pay differences that do not reflect differences in skills, responsibilities, or performance but rather discrimination based on race, gender, or other non-performance-related factors.

Black Baseball Players

Athletes of African descent who have participated professionally in baseball leagues, highlighting their contribution to the sport's history.