Brazosport Pipe Corporation
the Capital Budgeting Committee of the Brazosport $\text {\underline{ Old machine} }$

Multiple Choice

Brazosport Pipe Corporation
The capital budgeting committee of the Brazosport Pipe Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced model.Information on the existing machine and the new model follows:
                                                                        $\text {\underline{ Old machine} }$    $\text {\underline{ New machine} }$
$\begin{array}{lll}\text { Original cost } & \$ 200,000 && \$ 400,000 \\\text { Market value now } & 8,000 & \\\text {Market value in year 5 } & 0& & 20,000 \\\text { Anmual cash operating costs } & 40,000&&10,000 \\\text { Remaininglife } & 5\text { yrs } &&5 yrs\end{array}$







Refer to Brazosport Pipe Corporation.The major opportunity cost associated with the continued use of the existing machine is

A) $30,000 of annual savings in operating costs.
B) $20,000 of salvage in 5 years on the new machine.
C) lost sales resulting from the inefficient existing machine.
D) $400,000 cost of the new machine.