Answer the Following Questions Using the Information Below:
Pizza for Everyone

question 173

Multiple Choice

Answer the following questions using the information below:
Pizza For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:
$\begin{array}{lrr}&\text { Existing van }&\text { New van }\\\text { Ori ginal cost } & \$ 50,000 & \$ 90,000 \\\text { Annual operating cost } & \$ 17,500 & \$ 10,000 \\\text { Accumulated depreciation } & \$ 30,000 & - \\\text { Current salvage value of the existing van } & \$ 22,500 & -\\\text { Remaining life } & 10 \text { years } & 10 \text { years } \\\text { Salvage value in } 10 \text { years } & \$ 0 & \$ 0 \\\text { Annual depreciation } & \$ 2,000 & \$ 9,000\end{array}$
-Sunk costs include ________.

• A) the accumulated depreciation of the existing van
• B) the original cost of the new van
• C) the current salvage value of the existing van
• D) the annual operating cost of the new van

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Definitions:

Leniency Error

Leniency error occurs in the assessment process when an evaluator consistently rates individuals more positively than their performance warrants, often due to a desire to avoid conflict or to be perceived as favorable.

Performance Ratings

The assessment and documentation of an employee’s job performance using various methods, including qualitative and quantitative metrics.

Manager

An individual responsible for directing and overseeing the work of a group of people in an organization, making decisions, planning, and implementing strategies to achieve goals.

Severity Error

A bias in performance appraisal where the evaluator tends to judge all employees as performing at the same level, usually at an extreme of performance.