Management of Childers Corporation Is Considering Whether to Purchase a New

question 145

Multiple Choice

Management of Childers Corporation is considering whether to purchase a new model 380 machine costing $278,000 or a new model 230 machine costing $207,000 to replace a machine that was purchased 3 years ago for $266,000. The old machine was used to make product R16K until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 230 machine. It has less capacity than the new model 380 machine, but its capacity is sufficient to continue making product R16K.
Management also considered, but rejected, the alternative of simply dropping product R16K. If that were done, instead of investing $207,000 in the new machine, the money could be invested in a project that would return a total of $305,000.
In making the decision to buy the model 230 machine rather than the model 380 machine, the differential cost was:

• A)$71,000
• B)$59,000
• C)$12,000
• D)$39,000

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Definitions:

Domain

The set of all possible input values (usually x-values) for which a function or relation is defined.

Range

The difference between the highest and lowest values in a set; or in functions, the set of all possible output values.

\(g ( x )\)

A function notation similar to \(f ( x )\), where \(g\) represents another function with the variable \(x\).

Thermostat

A device used to maintain the temperature of a system at a desired set point by regulating the flow of heat energy.