Answer the Following Questions Using the Information Below:
Frederick Company

question 210

Multiple Choice

Answer the following questions using the information below:
Frederick Company is considering replacing a machine.The following data are available:
$\begin{array}{lrr}&& \text { Replacement } \\&\text { Old Machine } & \text { Machine }\\\text { Original cost } & \$ 45000 & \$ 35000 \\\text { Useful life in years } & 10 & 5 \\\text { Current age in years } & 5 & 0 \\\text { Book value } & \$ 25000 & - \\\text { Disposal value now } & \$ 6000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 6500 & \$ 4000\end{array}$
-For the decision to keep the old machine,the relevant costs of keeping the old machine total:

• A)$72 000
• B)$32 500
• C)$47 000
• D)$60 000

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Definitions:

Perfectly Rational

A theoretical concept in which an individual is assumed to make decisions that maximize their utility based on complete information.

Satisfice

A decision-making strategy that involves choosing an option that meets a minimum threshold of acceptability rather than the optimal solution.

Satisficing

A decision-making strategy that aims for a satisfactory or adequate result, rather than the optimal solution, due to limitations in time, information, or resources.

Absenteeism

Absenteeism refers to the habitual non-presence of an employee at their job without a valid reason, often affecting productivity and morale.