Maxwell Manufacturing Is Contemplating the Purchase of a New Machine

question 40

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 of $50,000 and still has five years of useful life remaining.The old machine has a current market value of $5,000,and would have no market value after five years.The variable operating costs and depreciation expenses (straight-line) 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 decision-making costs if the old machine is replaced?

• A)$5,000.
• B)$15,000.
• C)$25,000.
• D)$35,000.
• E)$40,000.

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Definitions:

Compressor Pumping

The action of a compressor moving fluid or gas through a system, such as in refrigeration or HVAC systems.

Oil Drain Ports

Specifically designed openings in an engine or machinery used for the drainage of oil, facilitating regular maintenance and oil changes.

Free-stroke Limit

The maximum allowable distance a linkage or component (such as a clutch pedal) can move without engaging or affecting the operation of the mechanism.

Clamp-type

A fastening device or mechanism that holds objects tightly together to prevent movement or separation, utilizing a clamping action.