Question

Planet Design​ Services, Inc., is considering replacing a machine. The following data are​ available: Old Machine Replacement Machine Original cost $ 630 comma 000 $ 490 comma 000 Useful life in years 8 4 Current age in years 4 0 Book value $ 350 comma 000 long dash Disposal value now $ 162 comma 000 long dash Disposal value in 4 years ​$0 ​$0 Annual cash operating costs $ 108 comma 000 $ 66 comma 000 For the decision to keep the old​ machine, the relevant costs of keeping the old machine is​ ________.

A. $ 432 comma 000.
B. $ 640 comma 000.
C. $ 108 comma 000.
D. $ 594 comma 000.

Answer 1

A. $ 432 comma 000.

Step-by-step explanation:

The computation of the relevant cost of keeping the old machine is​ shown below:

= Annual cash operating costs × Current age in years

= $108,000 × 4 years

= $432,000

To find out the relevant cost for the old machine, we multiply the annual cash operating cost with its current age so that the accurate cost can come

All other information which is given in the question is not relevant. Hence, ignored it