The Plastic Lumber Company is considering whether it should replace an extrusion machine. The new machine will produce 40% more finished lumber than the old machine. The increase in production will cause fixed selling costs to increase, but variable selling costs will not increase. The new machine will require installation by an engineering firm; the old machine had required a similar installation. If the new machine is purchased, the old machine can be sold as scrap. The old machine requires frequent repairs and maintenance to keep it running, while the new machine will require maintenance once a year. The new machine will be paid for by signing a notes payable with the bank that will cover the cost of the new machine. The Plastic Lumber Company will pay interest on the notes payable. The notes payable that was used to pay for the old machine was fully paid off last year.
In the following chart, indicate whether each of the costs described would be relevant or not to Plastic Lumber Company’s decision about whether to purchase the new extrusion machine or to keep using the old extrusion machine.

  • CreatedApril 30, 2015
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