Question

Abbott Company is considering purchasing a new machine to replace a machine purchased one year ago that is not achieving the expected results. The following information is available:

Expected maintenance costs of new machine $12,000 per year
Purchase price of existing machine $150,000
Expected cost savings of new machine $20,000 per year
Expected maintenance costs of existing machine $8,000 per year
Resale value of existing machine $35,000

Which of these items is irrelevant?

Answer 1

Answer:

The answer is Purchasing price of existing machine

Explanation:

      Purchasing price of an existing machine can be described as the value at which a machine cost as at when it was previously up for sales from its manufacturer company or a wholesaler.

     Since Abbott company is considering to purchase a new machine to replace an old machine purchased one year ago for the fact that the machine is not achieving the expected results, they do not need to concern themselves over its previous price but should only be concerned about the cost of new machine, cost saving on the new machine, resale value of existing machine, maintenance cost of existing machine so as to put it in a good shape before sales and maintenance cost of the new machine.