E11-32 (similar to) Grandma's Bakery is thinking about replacing the convection oven with a new, more energy-efficient model. Information related to the old and new ovens follows: (Click the icon to view the information related to the old and new ovens.) Read the requirements. Requirement 1 and 2. Which of the costs and benefits above are relevant to the decision to replace the oven? What information is irrelevant? Why is it irrelevant? Question Help Begin by determining whether each item is relevant or irrelevant for this decision. If an item is irrelevant, select why it is irrelevant. (Make a selection for each item in the Old Oven and New Oven columns. In the "Why Irrelevant" column, only make a selection for irrelevant items. For relevant items, leave the input field blank; do not select a label.) Old Oven Original cost Irrelevant New Oven Relevant Why Irrelevant Sunk cost Accumulated depreciation Irrelevant Not applicable Sunk cost Book value Irrelevant Not applicable Sunk cost Current disposal value Relevant Not applicable Installation cost Not applicable Relevant Annual operating cost Terminal disposal value Relevant Irrelevant Relevant Irrelevant Don't differ Data Table - X Requirements Old Oven New Oven Ignore the effect of income taxes and the time value of money. Original cost $ 30,000 $ Accumulated depreciation Book value $ 6,800 $ 28,000 44,000 Not acquired yet Not acquired yet 1. Which of the costs and benefits above are relevant to the decision to replace the oven? Requirement 3. Should Grandma's Bakery purchase the new oven? Provide support for your answer. Begin by selecting the relevant items and then entering the appropriate cost in each respective column. Be sure to total the relevant costs Current disposal value Installation cost $ 25,000 Not applicable $ Not acquired yet 2,700 Annual operating cost $ 13,000 $ 8,000 Keep old oven New oven Useful life 8 years 5 years Total Total 2. What information is irrelevant? Why is it irrelevant? 3. Should Grandma's Bakery purchase the new oven? Provide support for your answer. 4. Is there any conflict between the decision model and the incentives of the manager who has purchased the "old" oven and is considering replacing it only 3 years later? 5. At what purchase price would Grandma's Bakery be indifferent between purchasing the new oven and continuing to use the old oven? Current age 3 years 0 years Remaining useful life 5 years 5 years Print Done Terminal disposal value (in 5 years) $ 0 $ 0 Total relevant costs Print Done X