Maxwell Manufacturing Is Contemplating the Purchase of a New Machine

question 7

Multiple Choice

Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years. The old machine has a net book value (NBV) of $50,000 and still has five years of useful life remaining. The old machine has a current market value of $5,000, but is expected to have no market value after five years. The variable operating costs and depreciation expenses (straight-line basis) are $135,000 per year. The new machine will cost $90,000, has an estimated useful life of five years with zero disposal value after five years, and an annual operating expense of $118,000 (including straight-line depreciation) . Considering the five years in total and ignoring the time value of money and income taxes, what is the difference in total relevant costs for the two decision alternatives (keep vs. replace) ?

• A) $0.
• B) $25,000.
• C) $35,000.
• D) $40,000.
• E) $50,000.

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Definitions:

Monosaccharides

Simple sugars that are the most basic form of carbohydrates, serving as the building blocks for more complex sugars and providing immediate energy for cells.

Glycosidic Bond

A covalent bond that joins a carbohydrate molecule to another molecule, which may be another carbohydrate or a different type of molecule.

Hydroxyl Group

Polar functional group; abbreviated —OH.

Weakly Acidic

Describing a substance that has a slightly acidic pH, typically close to neutral but below 7 on the pH scale.