Smith Industries Is Considering Replacing a Machine That Is Presently

question 48

Multiple Choice

Smith Industries is considering replacing a machine that is presently used in its production process.The following information is available: Which of the following amounts represents a sunk cost?

• A)$55,000
• B)$33,000
• C)$9,000
• D)$45,000

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Definitions:

Troy Ounce

A unit of measure for precious metals that is approximately 31.1035 grams, traditionally used in the pricing and trading of these commodities.

September Silver Contract

An agreement for the future delivery of silver in September, often used as a hedging tool or investment in the commodities market.

Option Contract

A financial derivative that provides the buyer the right, but not the obligation, to buy (call) or sell (put) an underlying asset at a predetermined price within a specific time period.

Hedge Risk

The strategy of minimizing potential financial losses or gains by using financial instruments or other measures.