Question: Bert Company is considering replacing a machine that is presently used in the production of its product. The following data are available: Replacement Old Machine
Bert Company is considering replacing a machine that is presently used in the production of its product. The following data are available:
Replacement
Old Machine Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000
Disposal value now $8,000
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is _____the old machine.
| A. | $37,000 in favor of replacing | |
| B. | $22,000 in favor of replacing | |
| C. | $12,000 in favor of keeping | |
| D. | $22,000 in favor of keeping |
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