MRS Corporation purchased a machine 10 years back for Tk.3910000 when it launched product P6. Suddenly...

 

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MRS Corporation purchased a machine 10 years back for Tk.3910000 when it launched product P6. Suddenly the machine has broken down and not repairable. The machine could be replaced by a new model 400 machine costing Tk.3310000 or by a new model 500 machine costing Tk.2570000. Management has decided to buy the model 500 machine. If that were done, the investment would be Tk.2570000 in-exchange of retum to be earned from buying alternative machine Tk.3470000. Requirements: i. What is the total differential cost regarding the decision to buy the new model 500 machine rather than the model 400 machine? ii. What is the sunk cost regarding the decision to buy the model 500 machine rather than the model 400 machine? ii. What is the total opportunity cost regarding the decision to invest in the model 500 machine? iv. What is the total opportunity cost regarding the decision to machine now if the machine's life is 15 years and depreciate under straight-line method? MRS Corporation purchased a machine 10 years back for Tk.3910000 when it launched product P6. Suddenly the machine has broken down and not repairable. The machine could be replaced by a new model 400 machine costing Tk.3310000 or by a new model 500 machine costing Tk.2570000. Management has decided to buy the model 500 machine. If that were done, the investment would be Tk.2570000 in-exchange of retum to be earned from buying alternative machine Tk.3470000. Requirements: i. What is the total differential cost regarding the decision to buy the new model 500 machine rather than the model 400 machine? ii. What is the sunk cost regarding the decision to buy the model 500 machine rather than the model 400 machine? ii. What is the total opportunity cost regarding the decision to invest in the model 500 machine? iv. What is the total opportunity cost regarding the decision to machine now if the machine's life is 15 years and depreciate under straight-line method?

Answer rating: 100% (QA)

1Differential Cost Cost of a new model 400 machine Cost of a new model 500 machin... View the full answer