When Deciding to Purchase a New Cutting Machine or Continue

question 120

Multiple Choice

When deciding to purchase a new cutting machine or continue using an existing machine, the following costs are all relevant except the:

• A) Original cost of the old machine.
• B) Cost (purchase price) of the new machine.
• C) Disposal (salvage) value of the old (existing) machine.
• D) Annual savings in operating costs if the new machine is purchased.
• E) Maintenance costs, if expected to be less under the new machine.

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Definitions:

Intangible Assets

Non-physical assets of a business such as intellectual property, brand value, and goodwill that have value but are not physical objects.

Income Potential

The maximum amount of money someone can earn or a business can generate under current conditions.

Dead Stock

Unsold goods that have been in inventory for a long time and are not expected to be sold due to their obsolescence or lack of demand.

Supplier Relationships

Supplier relationships pertain to the interactions and dealings between a business and its suppliers, involving the negotiation of terms, management of supply, and collaboration for mutual benefit.