ONLY GIVE CORRECT ANSWER KUDOS!
Requirements Ignore the effect of income taxes and the time value of money. 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 Buttercup 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 Buttercup Bakery be indifferent between purchasing the new oven and continuing to use the old oven? Print Done X Data table Original cost Accumulated depreciation Book value Current disposal value Installation cost Annual operating cost Useful life Current age Remaining useful life Terminal disposal value (in 7 years) Print EA 25,000 $ $ 6,200 $ 16,000 $ 13,000 Not applicable $ 11,000 $ Old Oven SA 10 years 3 years 7 years Done 0 $ New Oven 47,000 Not acquired yet Not acquired yet Not acquired yet 2,600 4,000 7 years 0 years 7 years 0 - X Buttercup 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. Why is it irrelevant? 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 Irrelevant Irrelevant New Oven Relevant Why Irrelevant Sunk cost Original cost Accumulated depreciation 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 Relevant Relevant Terminal disposal value Irrelevant Irrelevant Don't differ Requirement 3. Should Buttercup 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. (If an input field is not used in the table, leave the input field empty; do not enter a zero. Use a minus sign or parentheses for any costs.) Keep old oven New oven Total Total Current disposal value (market value) Original cost (purchase price) Installation cost Operating cost for 7 years Total relevant costs
