The Enger Company Is Contemplating Replacing Some Old Equipment

question 18

Multiple Choice

The Enger Company is contemplating replacing some old equipment. The pertinent information is as follows:
-Which of the data provided in the table is a sunk cost?

• A) The annual cash operating costs of the old equipment
• B) The annual cash operating costs of the replacement equipment
• C) The disposal value of the old equipment
• D) The original cost of the old equipment

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Definitions:

Return On Investment

A measure used to evaluate the efficiency of an investment or compare the efficiencies of several different investments, calculated as net profit divided by the cost of the investment.

Return On Investment Ratio

A financial metric used to evaluate the efficiency of an investment, calculated by dividing the net profit by the original capital cost of the investment.

Judgmental Factors

Elements that require personal assessment and decision-making in the valuation of assets, determination of liabilities, or other financial reporting activities.

Static Budget

A budget that remains unchanged over the period it covers, regardless of changes in sales volume, production levels, or other external factors, often used for fixed expenses.