Rocko Inc Has a Machine with a Book Value of $50,000

question 74

Multiple Choice

Rocko Inc. has a machine with a book value of $50,000 and a five year remaining life. A new machine is available at a cost of $85,000 and Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five year life. Should the machine be replaced?

• A) Yes, because income will increase by $14,000 per year.
• B) Yes, because income will increase by $23,000.
• C) No, because the company will be $23,000 worse off.
• D) No, because the income will decrease by $14,000 per year.
• E) Rocko will be not be better or worse off by replacing the machine.

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Definitions:

Pancreas

A glandular organ in the digestive and endocrine system of vertebrates. It produces enzymes that help in digestion and hormones such as insulin, which regulates blood sugar levels.

Glucose Utilization

The process by which cells absorb and convert glucose into energy for cellular functions.

Obesity

A medical condition characterized by excess body fat that poses a risk to health.

Alzheimers

A progressive neurological disorder characterized by memory loss, cognitive decline, and personality changes, caused by the accumulation of amyloid plaques and neurofibrillary tangles in the brain.