Smith Industries Is Considering Replacing a Machine That Is Presently

question 144

Multiple Choice

Smith Industries is considering replacing a machine that is presently used in its production process. Which of the following is irrelevant to the replacement decision?
$$\begin{array} { | l | r | r | } \hline & \text { Old Machine } & \begin{array} { c } \text { Replacement } \\\text { Machine }\end{array} \\\hline \text { Original cost } & \$ 55,000 & \$ 46,000 \\\hline \text { Remaining useful life in years } & 5 & 5 \\\hline \text { Current age in years } & 5 &0 \\\hline \text { Book value } & \$ 33,000 & \\\hline \text { Current disposal value in cash } & \$ 9,000 & \\\hline \text { Future disposal value in cash (in 5 years) } &\$0&\$0 \\\hline \text { Annual cash operating costs } & \$ 8,000 & \$ 4,000 \\\hline\end{array}$$ Which of the information provided in the table is irrelevant to the replacement decision?

• A) the sales price of the new machine
• B) the original cost of the old machine
• C) the current disposal value of the old machine
• D) the annual cash operating costs

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Definitions:

Conviction

The firm belief in the truth of one’s products or services, often seen as necessary for successful sales efforts.

Prospect

A potential customer or client who has been identified as fitting a target market or demographic but has not yet made a purchase.

Mental Steps

The cognitive processes or stages one goes through when solving a problem or making a decision.

Purchasing Decision

The process of evaluating and choosing among alternative products or services to fulfill a need or desire.