Smith Industries Is Considering Replacing a Machine That Is Presently

question 11

Multiple Choice

Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available:
$$\begin{array} { | l | r | r | } \hline& \text { Old Machine } &{ \begin{array} { c } \text { Replacement } \\\text { Machine }\end{array} } \\ \hline \text { Original cost } & \$ 45,000 & \$ 35,000 \\\hline \text { Remaining useful life in years } & 5 & 5 \\\hline \text { Current age in years } & 5 &0 \\\hline \text { Book value } & \$ 25,000 & \\\hline \text { Current disposal value in cash } & \$ 8,000 & \\\hline \text { Future disposal value in cash (in 5 years) } & \$0 & \$0\\\hline \text { Annual cash operating costs } & \$7,000&\$4,000 \\\hline\end{array}$$
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Which of the information provided in the table is irrelevant to the replacement decision?

• A) The price of the new machine
• B) The original cost of the old machine
• C) The current disposal value of the old machine
• D) Annual operating costs

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