Refer
to
the
previous
question.
Suppose
that
Mambo
had
the
opportunity
to
sell
the
old
machine
to
a
friend
at
another
company
for
$2,500
but
chose
instead
to
trade
the
machine
in
on
the
new
machine,
to
avoid
the
risk
of
the
friend
not
being
satisfied
with
the
old
machine.
Using
this
additional
information,
calculate
the
relevant
cost
of
the
new
machine.
a.
$18,000,
or
the
net
cash
paid
to
the
distributor
b.
$20,000,
or
the
gross
cost
of
the
new
machine
c.
$18,500,
or
the net
cost
of
the
new
machine
plus
the
opportunity
cost
of
$500,
which
is
the
difference
between
the
trade-in
value
of
the
old
machine
and
the
amount
offered
by
the
friend
for
the
old
machine.
d.
$19,000,
or
the
gross
cost
of
the
new
machine
minus
the
$1,000
loss
on
disposing
of
the
old
machine.
Answer:
¢
Rationale:
The
relevant
cost
of
the
new
machine
is
now
$18,500.
The
$500
opportunity
cost
of
not
accepting
the
best
alternative
for
disposing
of
the
old
machine
is
an
additional
economic
cost
of
acquiring
the
new
machine.
