Practice Irrelevance Of Past Estimates (1.6) - Equipment Life and Replacement Analysis (Part 3)

Practice: Irrelevance of Past Estimates

Lesson 1.6Equipment Life and Replacement Analysis (Part 3)

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9 questions

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3 cards from this section. Quick, good the night before a test.
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6 questions · about 4 min · pass mark 70%. Hints available.
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Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is the definition of sunk cost?
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Think about costs already incurred.
Question 2.
Why should we focus on current market value?
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Consider what affects current choices.
3Question 3.
What should you exclude from your replacement analysis?
- Initial purchase cost
- Current market value
- Maintenance cost
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Which reflects today’s situation better?
4Question 4.
Are sunk costs relevant in making replacement decisions?
- True
- False
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Consider past costs versus future values.
Question 5.
A construction company initially invested $200,000 in a bulldozer. After 10 years, the current market value is $50,000. They have maintained it well, but operational costs are increasing. Outline their decision process based on replacement analysis.
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Focus on current financial implications rather than previous investments.
Question 6.
Explain a scenario where failing to recognize sunk costs might lead a manager to delay a beneficial equipment replacement.
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Consider emotions tied to money spent in the past.

5 more questions in this section. Enroll free to practise them all.