A Company Decided to Replace an Old Machine with a New

question 38

Multiple Choice

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

• A) the book value of the old equipment
• B) the depreciation expense on the old equipment
• C) the loss on the disposal of the old equipment
• D) the setup cost of the new equipment

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Definitions:

Production Increase

The rise in the quantity of goods and services produced by a company over a specific period.

Total Variable Cost

The total of all expenses that change in direct proportion to the amount of goods or services produced.

Manufacturing Overhead Cost

All manufacturing costs that are not directly associated with the production process, including indirect materials, indirect labor, and other overhead costs.

Relevant Range

The spectrum of operations or magnitude within which the premises regarding constant and fluctuating cost dynamics hold true.