Smith Industries Is Considering Replacing a Machine That Is Presently

question 118

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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For a machine replacement decision which of the information provided in the table is a sunk cost?

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

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Definitions:

Ribosome

Complex molecular machines in cells that synthesize proteins by translating messenger RNA into amino acid sequences.

Binding Sites

Specific regions on molecules (e.g., enzymes, receptors) where other molecules (e.g., substrates, ligands) can attach or bind.

tRNAs

Small RNA molecules that transport amino acids to the ribosome during protein synthesis according to the sequence of a messenger RNA (mRNA) transcript.

RNA Polymerase

An enzyme that catalyzes the synthesis of RNA from a DNA template.