ACCOUNTING
Multiple Choice
Flowers For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:
Existing van New van
Original cost $100,000 $180,000
Annual operating cost $ 35,000 $ 20,000
Accumulated depreciation $ 60,000 ---
Current salvage value of the existing van $ 45,000 ---
Remaining life 10 years 10 years
Salvage value in 10 years $ 0 $ 0
Annual depreciation $ 4,000 $ 18,000
Sunk costs include
a. the original cost of the existing van.
b. the original cost of the new van.
c. the current salvage value of the existing van.
d. the annual operating cost of the new van.
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