A company is considering replacing an old piece of machinery, which cost $105,000 and has $55,000 of accumulated depreciation to date, with a new machine that has a purchase price of $83,000. The old machine could be sold for $56,300. The annual variable production costs associated with the old machine are estimated to be $8,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $5,000 per year for eight years. a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29
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Machine Replacement Decision
A company is considering replacing an old piece of machinery, which cost $105,000 and has $55,000 of
accumulated depreciation to date, with a new machine that has a purchase price of $83,000. The old machine could be sold for $56,300. The annual variable production costs associated with the old machine are estimated to be $8,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $5,000 per year for eight years.a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Continue
with Old
Machine
(Alternative 1)Replace
Old
Machine
(Alternative 2)Differential
Effect
on Income
(Alternative 2)Revenues: Proceeds from sale of old machine $fill in the blank e565490b5fb8ff0_1 $fill in the blank e565490b5fb8ff0_2 $fill in the blank e565490b5fb8ff0_3 Costs: Purchase price fill in the blank e565490b5fb8ff0_4 fill in the blank e565490b5fb8ff0_5 fill in the blank e565490b5fb8ff0_6 Variable production costs (8 years) fill in the blank e565490b5fb8ff0_7 fill in the blank e565490b5fb8ff0_8 fill in the blank e565490b5fb8ff0_9 Income (Loss) $fill in the blank e565490b5fb8ff0_10 $fill in the blank e565490b5fb8ff0_11 $fill in the blank e565490b5fb8ff0_12 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.
b. What is the sunk cost in this situation?
The sunk cost is $fill in the blank 783ba3024feff94_1.
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