Dechico Corporation Purchased a Machine 3 Years Ago for $456,000

question 53

Multiple Choice

Dechico Corporation purchased a machine 3 years ago for $456,000 when it launched product G92L. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 330 machine costing $474,000 or by a new model 260 machine costing $418,000. Management has decided to buy the model 260 machine. It has less capacity than the model 330 machine, but its capacity is sufficient to continue making product G92L. Management also considered, but rejected, the alternative of dropping product G92L and not replacing the old machine. If that were done, the $418,000 invested in the new machine could instead have been invested in a project that would have returned a total of $496,000. In making the decision to buy the model 260 machine rather than the model 330 machine, the differential cost was:

• A)$18,000
• B)$56,000
• C)$38,000
• D)$40,000

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Definitions:

English Settlements

Colonies established by England in various parts of the world during the 17th and 18th centuries, particularly in North America.

South Carolina

A state in the southeastern United States, known for its shorelines, subtropical beaches, and historical significance in the American Civil War.

Gold Coast

A region on the Gulf of Guinea in West Africa known for its gold exports; also the name of a historic British colony that became Ghana.

Slave Trade

The historical capturing, selling, and buying of human beings for the purpose of forced and unpaid labor, particularly prevalent across the Atlantic from the 16th to the 19th centuries.