Asked by Osama Al-bahnasi on Jun 30, 2024
Verified
Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?
A) The cash price of the new equipment
B) The salvage value of the old equipment
C) The book value of the old equipment
D) The cost savings if the new equipment is purchased
Book Value
The net value of a company's assets subtracting the total liabilities, often used to assess a company's worth or the value of individual assets.
Salvage Value
The estimated resale value of an asset at the end of its useful life.
Cost Savings
Reductions in costs achieved through methods such as efficiency improvements, negotiations for better prices, or elimination of unnecessary expenses.
- Identify the distinctions between relevant and irrelevant expenses in scenarios requiring decisions.
Verified Answer
ZK
Zybrea KnightJul 07, 2024
Final Answer :
C
Explanation :
The book value of the old equipment is not relevant because it is a sunk cost and cannot be recovered regardless of the decision to replace the equipment or not. The cash price of the new equipment, the salvage value of the old equipment, and the cost savings if the new equipment is purchased are all relevant factors that should be considered in the decision-making process.
Learning Objectives
- Identify the distinctions between relevant and irrelevant expenses in scenarios requiring decisions.