Reading Quiz 13


 Question 1
1 out of 1 points
A firm owns a pressure vessel that it is contemplating replacing. The old
pressure vessel has annual operating and maintenance expenses of
$60,000 per year and it can be kept for five more years, at which time it
will have zero MV. It is believed that $30,000 could be obtained for the
old pressure vessel if it were sold now. What is the opportunity cost of
keeping the old pressure vessel?
Answer
Selected
Answer:
$30,0
00
 Question 2
1 out of 1 points
If the marginal cost of keeping the defender asset for one more year is
less than the minimum EUAC of the challenger asset, then the decision
should be to replace the defender asset with the challenger asset.
Answer
Selected Fals
Answer: e
Response Correc
Feedback:
t!
 Question 3
1 out of 1 points
It is important to know the economic life, minimum EUAC, and total year-
by-year (marginal) costs for both the best challenger and the defender so
that they can be compared on the basis of an evaluation of their
economic lives and the costs most favorable to each.
Answer
Selected Tru
Answer: e
Response Good! Please read
Feedback:
Section 9.5.
 Question 4
1 out of 1 points
Regardless of how the remaining economic life for the defender is
determined, a decision to keep the defender does not mean that it should
be kept only for this period of time. Indeed, the defender should be kept
longer than the apparent economic life as long as its marginal cost (total
cost for an additional year of service) is less than the minimum EUAC for
the best challenger.
Answer
 Selected Tru
Answer: e
Response Good! Please read
Feedback:
Section 9.6.
 Question 5
1 out of 1 points
The need to evaluate the replacement, retirement, or augmentation of
assets results from changes in the economics of their use in an operating
environment. Various reasons can underlie these changes, and
unfortunately they are sometimes accompanied by unpleasant financial
facts. The following are the three major reasons that summarize most of
the factors. Match these three reasons with correct description.
Answer

Question Selected Match

Physical A.
Impairment There are changes that occur in the physical condition
(Deterioration) of an asset. Normally, continued use (aging) results in
the less efficient operation of an asset. Routine
maintenance and breakdown repair costs increase,
energy use may increase, more operator time may be
required, and so forth. Or, some unexpected incident
such as an accident occurs that affects the physical
condition and the economics of ownership and use of
the asset.
Altered B.
Requirements Capital assets are used to produce food and services
that satisfy human wants. When the demand for a good
or service either increases or decreases or the design of
a good or service changes, the related asset(s) may
have the economics of its use affected.
Technology C.
The impact of changes in technology varies among
different types of assets. For example, the relative
efficiency of heavy highway construction equipment is
impacted less rapidly by technological changes than
automated manufacturing equipment. In general, the
costs per unit of production, as well as quality and other
factors, are favorably impacted by changes in
technology, which result in more frequent replacement
of existing assets with new and better challengers.
Response Good! Please read
Feedback:
Section 9.2.
Monday, November 12, 2012 11:31:12 PM CST