Sunk costs include:the original cost of the new system.the annual operating cost of the new system.the original cost of the existing system.the current salvage value of the existing system. Down East Chemicals is considering replacing its existing computer systemwith a new computer system. The new system can offer considerable savingsin computer processing and inventory management costs. Information aboutthe existing system and the new system follow:Original costAnnual operating costAccumulated depreciationCurrent salvage value of the existingsystemRemaining life in 5 yearsSalvage value in 5 yearsAnnual depreciationSunk costs include:Existing Computer New Computer$10,000$ 3,500$ 6,000$ 4,0005 years$0$ 2,000$15,000$ 2.000$ 3,000

A sunk cost is a cost that has already been incurred and cannot be recovered or changed. It is also…

Answered: Sunk costs include: the original cost…

Sunk costs include: the original cost of the new system. the annual operating cost of the new system. the original cost of the existing system. the current salvage value of the existing system.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Sunk costs include:
the original cost of the new system.
the annual operating cost of the new system.
the original cost of the existing system.
the current salvage value of the existing system.

Down East Chemicals is considering replacing its existing computer system
with a new computer system. The new system can offer considerable savings
in computer processing and inventory management costs. Information about
the existing system and the new system follow:
Original cost
Annual operating cost
Accumulated depreciation
Current salvage value of the existing
system
Remaining life in 5 years
Salvage value in 5 years
Annual depreciation
Sunk costs include:
Existing Computer New Computer
$10,000
$ 3,500
$ 6,000
$ 4,000
5 years
$0
$ 2,000
$15,000
$ 2.000
$ 3,000

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