Smith Industries Is Considering Replacing a Machine That Is Presently

question 123

Multiple Choice

Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available: $\begin{array}{|l|r|r|}\hline & \text { Old Machine } & \begin{array} { l } \text { Replacement } \\\text { Machine }\end{array} \\\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \\\hline \text { Remaining useful life in years } & 3 & 3 \\\hline \text { Current age in years } & 3 & 0 \\\hline \text { Book value } & \$ 33,000 & \\\hline \text { Current disposal value in cash } & \$ 9,000 & \\\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 0 \\\hline \text { Annual cash operating costs } & 8,500 & \$ 3,500 \\\hline\end{array}$ Which of the following amounts represent a sunk cost?

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

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Definitions:

Ovule Wall

The protective outer layer of an ovule, which develops into the seed coat upon fertilization.

Seed Coat

The outer protective covering of a seed.

Megaspore

A type of spore in plants that develops into a female gametophyte, involved in the reproductive process.

Sporophyte Generation

The stage in the life cycle of plants and algae where the organism is diploid and generates spores.