Joseph Company is considering replacing an existing piece of machinery with newer technology. In deciding whether to replace the existing machinery, management should consider which costs as relevant? Multiple Choice Historical costs associated with the old machine. Future costs which will be classified as fixed rather than variable. Sunk costs associated with the old machine. Future costs which will be different under the two alternatives.

Question

Joan

Business

5 September, 07:31

Joseph Company is considering replacing an existing piece of machinery with newer technology. In deciding whether to replace the existing machinery, management should consider which costs as relevant? Multiple Choice Historical costs associated with the old machine. Future costs which will be classified as fixed rather than variable. Sunk costs associated with the old machine. Future costs which will be different under the two alternatives.

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Meredith Powell · Answer 1

Future costs which will be different under the two alternatives.

Explanation:

In simple words, while considering to replace the new machinery every entity must focus comely on two main aspects which are the historical cost or the cost at which the old machine could be sold and the future costs which will significantly affects the potential profits of the subject firm.

However, due to various different methods of depreciation and future value estimations one should consider all the methods in hand and then take the decision.