Savannah Motors
Savannah Motors Is Trying to Decide Whether It $\text {\underline{ Old machine} }$

Multiple Choice

Savannah Motors
Savannah Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine.Information on each machine follows:
                                                                        $\text {\underline{ Old machine} }$    $\text {\underline{ New machine} }$
$\begin{array}{lll}\text { Original cost } & \$ 9,000 && \$ 20,000 \\\text { Accumulated depreciation } & 5,000 && 0 \\\text { Annual cash operating costs } & 9,000& & 4,000 \\\text { Current salvage value of old machine } & 2,000 & \\\text { Salvage value in } 10 \text { years } & 500 && 1,000 \\\text { Remaininglife } & 10 \text { yrs } &&10 yrs\end{array}$




Refer to Savannah Motors.The $4,000 of annual operating costs that are common to both the old and the new machine are an example of a(n)

A) sunk cost.
B) irrelevant cost.
C) future avoidable cost.
D) opportunity cost.