Gertrude's Bakery is thinking about replacing the convection oven with new, more energy-efficient model. Information related to the old and new oven follows:

Begin by determining whether each item is relevant or irrelevant for this decision. If an item is irrelevant, select why it is irrelevant (dont differ, sunk cost)

1. Which of the costs and benefits above are relevant to the decision to replace the oven? 2. What information is irrelevant? Why is it irrelevant? 3. Should Gertrude'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 two years layer? 5. At what purchase price would Hertrud's Bakery be indifferent between purchasing the new oven and continuing to use the old oven?

mework: Chapter 11 7 of 9 (0 complete) Data Table Old Oven New Oven Original cost 26,000 $ 41,000 Accumulated depreciation 7,000 Not acquired yet Book value 20,000 Not acquired yet Current disposal value 16,000 Not acquired yet Installation cost Not applicable $ 2,600 Annual operating cost 10.000 $ 4,000 Useful life 9 years 7 years Current age 2 years O years Remaining useful life 7 years 7 years Terminal disposal value (in 7 years) 0 $ Ignore the effect of income taxes and the time value of money. $ Print Done Print Done Clear All w 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 in 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 en irrelevant items. For relevant items leave the box blank, do not select a label) Old Oven New Oven Why Irrelevant Original cost Accumulated depreciation Book value Current disposal value Installation cost Annual operating cost Terminal disposal value Choose from any drop-down list and then click Check Answer. 4 parts 4 remaining Clear All O Type here to search