Question

Spicer Company is contemplating the replacement of an old machine with a new one. The following information has been gathered:

Old Machine New Machine
Price $390,000 $530,000
Accumulated Depreciation 180,000 -0-
Remaining useful life 6years -0-
Useful life -0- 10 years
Annual operating costs $ 167,000 $ 151,500
If the old machine is replaced, it can be sold for $120,000.
Which of the following amounts is a sunk cost? (select one)
a- $151,500
b- $180,000
c- $210,000
d- $167,000

Answer 1

c- $210,000

Step-by-step explanation:

The computation of the sunk cost is as follows:

= Old machine prie - accumulated depreciation of old machine

= $390,000 - $180,000

= $210,000

Hence, the sunk cost is $210,000

Therefore the option c is correct

The same is to be considered