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20.      The disposal value of old equipment is relevant.

21.      Sunk cost is another term for historical cost or past cost.

22.      When making a decision to replace some old equipment with new, the depreciation taken on both the old or new equipment is irrelevant information.

23.      In practice, sunk costs often influence important decisions, especially when a decision maker does not want to admit that a previous decision was a bad decision.

24.      Future costs are relevant if they are the same under all feasible alternatives.

25.     Equipment’s book value is the original cost plus depreciation.
26.     Past costs may affect future payments for income taxes.
27.     Gain or loss on disposal of equipment is relevant in deciding whether to keep or replace equipment.
28.     Depreciation on new equipment is relevant in deciding whether to keep or replace equipment.

29.      Only unit costs computed using the same denominator level of production should be compared.


30.      Conflicts in the decision-making process can arise when superiors evaluate a manager's performance using a model consistent with the decision model.

31.     Generally, companies use aggregate measures to determine performance evaluations.

32.     The absorption approach to the income statement is used by companies for external financial reporting.

33.     The absorption approach emphasizes the distribution between fixed and variable costs.

34.     The contribution margin is computed using variable manufacturing costs and variable selling and administrative costs.

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