Asked by Ja’Na Speller on Jul 04, 2024
Verified
The book value of old equipment is not a relevant cost in an equipment replacement
decision problem.
Book Value
The net value of a company's assets found on its balance sheet, calculated as total assets minus liabilities and intangible assets.
Equipment Replacement
The process of substituting old, outdated, or failed machinery with newer, more efficient models or versions to maintain or enhance production efficiency.
- Identify and contrast between expenses that have already been incurred and costs associated with missed opportunities in decision-related situations.
Verified Answer
NA
Nur Amelia Ahmad ZakariaJul 10, 2024
Final Answer :
True
Explanation :
The book value of old equipment is a sunk cost and therefore not relevant in an equipment replacement decision. The relevant costs in such a decision are the incremental costs and benefits associated with acquiring and using the new equipment.
Learning Objectives
- Identify and contrast between expenses that have already been incurred and costs associated with missed opportunities in decision-related situations.