Gurnee Company Is Considering the Replacement of a Machine That

question 69

Multiple Choice

Gurnee Company is considering the replacement of a machine that is presently used in production.The following data are available:
$$\begin{array} { l l l l } \text { Original cost } & \$ 200,000 & \$ 160,000 \\\text { Wseful life in years } & 10 & 5 & \\\text { Current age in years } & 5 & 0 & \\\text { Fook value } & \$ 100,000 & - \\\text { Disposal value now } & \$ 32,000 & 0 & \\\text { Disposal value in } 5 \text { years } & 0 & \$ 14,000\end{array}$$
Adding all five years together,what is the difference in total relevant costs between the old and new machines?

• A) $12,000
• B) $30,000
• C) $98,000
• D) $130,000

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Definitions:

Marginal Physical Product

The additional output produced by employing one more unit of a specific factor of production, keeping other factors constant.

Machines

Devices or systems that use mechanical power to perform specific tasks, often reducing human effort.

Marginal Revenue Product

The increased earnings obtained by utilizing an extra unit of a production resource or input.

Perfect Competitor

An ideal market condition where all sellers offer identical products, leading to equal market share and no price control.