7. Raven Company is considering replacing equipment which originally cost $500,0

Question

7. Raven Company is considering replacing equipment which originally cost $500,000 and which has $460,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in this situation?
a. $330,000
b. $500,000
c. $40,000
d. $290,000

8. A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:

Domestic unit sales price $21
Unit manufacturing costs:
Variable 12
Fixed 5

What is the differential revenue from the acceptance of the offer?
a. $300,000
b. $420,000
c. $120,000
d. $240,000

Explanation / Answer

7. Raven Company is considering replacing equipment which originally cost $500,000 and which has $460,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in this situation? c. $40,000

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