Management of Sourwine Corporation Is Considering Whether to Purchase a New

question 53

Multiple Choice

Management of Sourwine Corporation is considering whether to purchase a new model 320 machine costing $389,000 or a new model 280 machine costing $318,000 to replace a machine that was purchased 6 years ago for $376,000. The old machine was used to make product C78P until it broke down last week. Unfortunately, the old machine cannot be repaired.
Management has decided to buy the new model 280 machine. It has less capacity than the new model 320 machine, but its capacity is sufficient to continue making product C78P.
Management also considered, but rejected, the alternative of simply dropping product C78P. If that were done, instead of investing $318,000 in the new machine, the money could be invested in a project that would return a total of $405,000.
-In making the decision to buy the model 280 machine rather than the model 320 machine, the sunk cost was:

• A) $376,000
• B) $318,000
• C) $405,000
• D) $389,000

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Definitions:

Ladybugs

Small, dome-shaped insects with distinctive red and black spots, known for their beneficial role in controlling pest populations.

Genetic Engineering

The manipulation of an organism's genes using biotechnology, often involving the transfer of specific traits, or genes, from one organism or species to another to improve or change characteristics.

Pest-resistant

Refers to plants that have developed or been genetically modified to resist pests, reducing the need for chemical pesticides.

Disease-resistant

The ability of an organism to prevent infection or resist the effects of disease-causing pathogens through natural or genetically modified traits.