Cherry, Inc., currently has a machine that costs $50,000 per year to operate. The machine can produce

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Cherry, Inc., currently has a machine that costs $50,000 per year to operate. The machine can produce 60,000 units per year. Two years ago the company borrowed $450,000 to purchase the machine; it still owes $325,000 of that amount. Cherry could sell the machine for $295,000 and purchase a new, more efficient machine at a cost of $480,000. The new machine can produce 85,000 units per year; its annual operating costs would be $55,000.


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Identify each piece of information in this scenario and indicate whether it is relevant or irrelevant to the decision to purchase the new machine.

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Managerial Accounting

ISBN: 9781119577669

4th Edition

Authors: Charles E. Davis, Elizabeth Davis

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