When does condemnation occur while replacing equipment?

Condemnation of equipment occurs primarily when the cost of repair exceeds the maximum repair allowance. In these cases, it is determined that repairing the equipment is not cost-effective, and it would be more sensible to replace it rather than invest resources into repairs that would not restore it to an acceptable condition. This evaluation is central to maintaining operational efficiency and ensuring that resources are utilized wisely.

When the cost of repairs surpasses what the organization is willing to spend—reflecting a threshold known as the maximum repair allowance—it typically signals that the equipment may no longer be viable for continued use, thus leading to the decision of condemnation. This process helps in managing budgets effectively while ensuring that equipment remains functional and reliable for its intended use. This rationale highlights the necessity of financial oversight in equipment management, making option B the correct and most pertinent choice in this scenario.