For an equipment replacement decision, what costs are relevant, and what costs are not relevant?
What will be an ideal response?
Answers will vary
Costs that are relevant include the purchase price of the new machine, the current market value of the old equipment, and any differences in operating costs for the two machines. Costs that are not relevant are the purchase price of the old equipment, its book value and annual depreciation, and any operating costs that would not change if the new machine is purchased.
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