2C2D CAPITAL COMPANY HAS DECIDED TO DISCONTINUE A PRODUCT PRODUCED ON...

252.

CSO: 2C2f

LOS: 2C2d

Capital Company has decided to discontinue a product produced on a machine purchased

four years ago at a cost of $70,000. The machine has a current book value of $30,000.

Due to technologically improved machinery now available in the marketplace the

existing machine has no current salvage value. The company is reviewing the various

aspects involved in the production of a new product. The engineering staff advised that

the existing machine can be used to produce the new product. Other costs involved in the

production of the new product will be materials of $20,000 and labor priced at $5,000.

Ignoring income taxes, the costs relevant to the decision to produce or not to produce the

new product would be

a.

$25,000.

b.

$30,000.

c.

$55,000.

d.

$95,000.