Sunday, September 11, 2011

Which of the data provided in the table is a sunk cost?

ACCOUNTING

Multiple Choice

Frederick, Inc., is considering replacing a machine. The following data are available:



Replacement

Old Machine Machine

Original cost $45,000 $35,000

Useful life in years 10 5

Current age in years 5 0

Book value $25,000 ‑

Disposal value now $8,000 ‑

Disposal value in 5 years 0 0

Annual cash operating costs $7,000 $4,000



Which of the data provided in the table is a sunk cost?

a. The annual cash operating costs of the old machine

b. The annual cash operating costs of the replacement machine

c. The disposal value of the old machine

d. The original cost of the old machine


Click here for the SOLUTION

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