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Trail Power has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested

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Trail Power has been using the same machines to make its name brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company S200.000. The old machines presently have a book value of $120,000 and a market value of $12,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $100,000 and have operating expenses of $18,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $30.000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $10,000 a year. Select the true statement, The company will be $28,000 better off over the 5-year period if it keeps the old equipment. 2 O The company will be $22,000 better off over the 5-year period if it replaces the old equipment. The company will be $12,000 better off over the 5-year period if it replaces the old equipment. The company will be $40,000 better off over the 5-year period if it keeps the old equipment. Halley Company has just received a special order for 1.000 deck chairs. Halley has sufficient idle capacity to accept the order. Accepting the order will increase Halley's variable manufacturing costs. Which type of cost is considered a sunk cost to Halley's decision of whether to accept or reject the special order? Depreciation on equipment that would be used to make the chairs O Raw materials to make the 1.000 deck chairs Materials handling cost Salary of the production manager Breezy Company is disposing of equipment that was originally purchased for $300,000 and has $120,000 of accumulated depreciation to date. The same equipment would cost $420,000 to replace. What is the total amount of sunk cost? S180,000 $420,000 $300,000 SI 20.000

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