Question
Cherry, Inc., currently has a machine that costs $50,000 per year to operate. The machine can produce 60,000 units per year. Two years ago, the
Cherry, Inc., currently has a machine that costs $50,000 per year to operate. The machine can produce 60,000 units per year. Two years ago, the company borrowed $450,000 to purchase the machine; it still owes $325,000 of that amount. Cherry could sell the machine for $295,000 and purchase a new, more efficient machine at a cost of $480,000. The new machine can produce 85,000 units per year; its annual operating costs would be $55,000. Indicate whether each piece of information in this scenario is relevant or irrelevant to the decision to purchase the new machine.
Operating cost of old machine | select an option Relevant Irrelevant | |
---|---|---|
Production of old machine | select an option Relevant Irrelevant | |
Purchase price of old machine | select an option Relevant Irrelevant | |
Loan balance | select an option Relevant Irrelevant | |
Market value of old machine | select an option Relevant Irrelevant | |
Cost of new machine | select an option Relevant Irrelevant | |
Production of new machine | select an option Relevant Irrelevant | |
Operating cost of new machine | select an option Relevant Irrelevant |
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