Inverness Company Is Considering the Replacement of a Machine That

question 91

Multiple Choice

Inverness Company is considering the replacement of a machine that is presently used in production.The following data are available:
$\begin{array}{lll}&\text { Old Machine }&\text { NEW Machine }\\\text { Original cost } & \$ 57,000 & \$ 35,000 \\\text { Useful life in years } & 17 & 5 \\\text { Current age in years } & 12 & 0 \\\text { Book value } & \$ 39,000 & -\\\text { Disposal value now } & \$ 8,000 & - \\\text { Disposal value in } 5 \text { years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 7,000 & \$ 4,000\end{array}$
Adding all five years together,what is the difference in total relevant costs between the old machine and the new machine?

• A) $12,000
• B) $15,000
• C) $22,000
• D) $37,000

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