A company's management team is considering replacing an old machine. It estimates that by keeping the old machine, the related operating costs will be $1,200,000 but will drop to $750,000 a year if the old machine is replaced with a new one. The disposal value of the old machine is $120,000, which is $10,000 below its book value ($10,000 loss on disposal.) The new machine will cost $520,000. Ignoring tax implications of a replacement, which of the followings statements is correct?

Question 34 options:

	Without consideration of nonfinancial factors, the old machine should be kept.
	The $10,000 loss on disposal is relevant.
	The difference in total costs between the two alternatives is $50,000.
	The relevant cost savings is $40,000.