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In the question below, why is the net book value $8400 is NOT relevant?
A machine which originally cost $12,000 has an estimated life of ten years and is depreciated at the rate of $1,200 a year. It has been unused for some time, as expected orders did not materialise.
A special order has now been received which would require the use of the machine for two months. The current net realisable value of the machine is $8,000. If it is used for the job, its value is expected to fall to $7,500. The net book value of the machine is $8,400.
Routine maintenance of the machine currently costs $40 a month. With use, the cost of maintenance and repairs would increase to $60 a month.
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