Smith Industries is considering replacing a machine that is presently used in it

Question

Smith Industries is considering replacing a machine that is presently used in its production process. The following information is available: Original Cost Old machine $45,000, Replacement machine $35,000; remaining useful life in years: Old machine 5, Replacement machine 5; current age inyears: Old machine 5, Replacement machine 0; Book value: Old machine $25,000, Replacement machine $0; current disposal value in cash: Old machine $8,000, Replacement machine $0; future disposal value in cash (in 5 years): Old machine $0, Replacement machine $0; Annual cash operating costs: Old machine $7,000, Replacement machine $4,000. Which of the information provided above is irrelevant to the replacement decision? a) the annual operating cost of the old machine b) the original cost of the old machine c) the current disposal value of the old machine d) both a and c

Explanation / Answer

b) the original cost of the old machine

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