Phaeton Inc. is trying to decide whether it should replace a five-year-old piece of manufacturing equipment with a new machine. When conducting the incremental analysis related to this decision. Phaeton should consider all of the following amounts except

a) the book value of the old equipment.

b) the variable manufacturing costs associated with the old machine.

c) the cost of the new machine.

d) any amount received from the sale of the old machine.

Question

Business

Rigoberto Paul

12 September, 06:58

Phaeton Inc. is trying to decide whether it should replace a five-year-old piece of manufacturing equipment with a new machine. When conducting the incremental analysis related to this decision. Phaeton should consider all of the following amounts except

a) the book value of the old equipment.

b) the variable manufacturing costs associated with the old machine.

c) the cost of the new machine.

d) any amount received from the sale of the old machine.

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Answers (1)

Know the Answer?

Paityn Oneill · Answer 1

The answer is: A) the book value of the old equipment.

Explanation:

When you are evaluating whether to buy new production equipment or not, you should consider the costs of the new equipment, operating costs, or any possible resale value of the old equipment. The book value of the old equipment is irrelevant only its resale price matters.