9) Gray Lake Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost$57,000$35,000
Useful life in years175
Current age in years120
Book value$39,000-
Disposal value now$8,000-
Disposal value in 5 years00
Annual cash operating costs$7,000$4,000
Adding all five years together, the total relevant costs to consider if the old machine is not replaced is ________.
A) $22,000
B) $31,000
C) $35,000
D) $39,000
10) Inverness Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost$57,000$35,000
Useful life in years175
Current age in years120
Book value$39,000-
Disposal value now$8,000-
Disposal value in 5 years00
Annual cash operating costs$7,000$4,000
Adding all five years together, what is the difference in total relevant costs between the old machine and the new machine?
A) $12,000
B) $15,000
C) $22,000
D) $37,000
11) Amanda Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost$200,000$160,000
Useful life in years105
Current age in years50
Book value$100,000-
Disposal value now$32,000-
Disposal value in 5 years00
Annual cash operating costs$20,000$14,000
Adding all five years together, the total relevant costs to consider if the new machine is purchased is ________.
A) $70,000
B) $100,000
C) $198,000
D) $230,000
12) Park Ridge Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost$200,000$160,000
Useful life in years105
Current age in years50
Book value$100,000-
Disposal value now$32,000-
Disposal value in 5 years00
Annual cash operating costs$20,000$14,000
Adding all five years together, the total relevant costs to consider if the old machine is kept is ________.
A) $32,000
B) $68,000
C) $80,000
D) $100,000
13) Gurnee Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost$200,000$160,000
Useful life in years105
Current age in years50
Book value$100,000-
Disposal value now$32,000-
Disposal value in 5 years00
Annual cash operating costs$20,000$14,000
Adding all five years together, what is the difference in total relevant costs between the old and new machines?
A) $12,000
B) $30,000
C) $98,000
D) $130,000
14) The gain or loss on the disposal of equipment is determined by ________.
A) subtracting the book value of the old equipment to the cost of the new equipment
B) subtracting the disposal value of the old equipment to the book value of the old equipment
C) subtracting the book value of the old equipment from the cash received for the old equipment
D) subtracting the book value of the old equipment from the cost of the new equipment
15) Sunbury Company is considering the replacement of a machine that is presently used in production. The following data are available:
Old Machine New Machine
Original cost$60,000$35,000
Useful life in years105
Current age in years50
Book value$25,000-
Disposal value now$8,000-
Disposal value in 5 years00
Annual cash operating costs$12,000$4,000
Adding all five years together, the total relevant costs to consider if the old machine is kept are ________.
A) $30,000
B) $50,000
C) $52,000
D) $60,000
16) The disposal value of old equipment is relevant in equipment replacement decisions.
17) Sunk cost is used to describe a historical cost or past cost.
18) When making a decision to replace some old equipment with new equipment, the book value of the ol
