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
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