Home Industries Is Considering Replacing a Machine That Is Presently

question 23

Multiple Choice

Home Industries is considering replacing a machine that is presently used in its production process.Which of the following amounts represents a sunk cost? $$\begin{array} { | l | r | r | } \hline & \text { Old Machine } & \begin{array} { l } \text { Replacement } \\\text { Machine }\end{array} \\\hline \text { Original cost } & \$ 55,000 & \$ 45,000 \\\hline \text { Remaining useful life in years } & 5 & 5 \\\hline \text { Current age in years } & 5 & 0\\\hline \text { Book value } & \$ 33,000 & \\\hline\text { Current disposal value in cash }&\$9,000\\ \hline \text { Furrent disposal value in cash (in } 5 \text { years) } & \$ 0 & \$ 0 \\\hline \text { Annual cash operating costs } & \$ 8,000 & \$ 4,000 \\\hline\end{array}$$

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