Question

It has been proposed to replace an outmoded piece of equipment with a new machine. The company's sales demand has exceeded its machine capacity in the past. The new equipment has a higher output than the old machine. This should be considered as:

A) Irrelevant
B) An incremental benefit
C) An incremental cost
D) Not enough information to determine

Answer 1

Replacing old equipment with a new machine that offers higher output is an incremental benefit due to its potential to increase production capacity and meet higher sales demands. So, the correct answer is option B.

Step-by-step explanation:

The replacement of an outmoded piece of equipment with a new machine that has a higher output should be considered an incremental benefit. This is because the company has previously experienced sales demands that exceeded machine capacity, thus an improvement in production capability can potentially increase the company's ability to meet demand and generate more sales and profit. The increased output capacity of the new machine directly adds value to the company's operations.

So, the correct answer is option B.