26. Hi-Tech Inc. has several outdated computers that cost a total of $8,900 and

Question

26. Hi-Tech Inc. has several outdated computers that cost a total of $8,900 and could be sold as scrap for $2,300. They could be updated for an additional $1,200 and sold. If Hi-Tech updates the computers and sells them, net income will increase by $4,500.
Reference: Ref 7-6

What amount would be considered sunk costs?
A) $1,200
B) $4,500
C) $8,900
D) $10,100

27. Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered:
Old Machine New Machine
Price $250,000 $500,000
Accumulated Depreciation 75,000 -0-
Remaining useful life 10 years -0-
Useful life -0- 10 years
Annual operating costs $200,000 $150,500


If the old machine is replaced, it can be sold for $20,000.

Which of the following amounts is relevant to the replacement decision?
A) $175,000
B) $250,000
C) $49,500
D) $75,000

28. The point in the production process when joint products are readily identifiable is the
A) separation point.
B) split-off point.
C) common point.
D) break-even point.

Explanation / Answer

26)option " c" is the correct answer. Sunk cost means the cost which incurred at the time of purchase of the asset. ie .8900 27) Option "a" is the correct answer. Old machine price = 250000 less: Accumialted depreciation = 75000 Net value = 175000 for repalcement purpose ,the 175000 only be used. 28) option "b" is the corerct answer. it is the stage of production at which point the joint products and by products are separatble.

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