annual variable production costs associated with the old machine are estimated to be $156,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $100,700 per year for 8 years. Question Content Area a.1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue with (Alt. 1) or Replace (Alt. 2) Old MachineDecember 10 Line Item Description Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative
A company is considering replacing an old piece of machinery, which cost $598,900 and has $352,300 of
Question Content Area
a.1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
| Line Item Description | Continue with Old Machine (Alternative 1) |
Replace Old Machine (Alternative 2) |
Differential Effects (Alternative 2) |
|---|---|---|---|
| Revenues: | |||
| Proceeds from sale of old machine | $Proceeds from sale of old machine | $Proceeds from sale of old machine | $Proceeds from sale of old machine |
| Costs: | |||
| Purchase price | Purchase price | Purchase price | Purchase price |
| Variable productions costs (8 years) | Variable productions costs (8 years) | Variable productions costs (8 years) | Variable productions costs (8 years) |
| $Profit (loss) | $Profit (loss) | $Profit (loss) |
Question Content Area
a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.
Question Content Area
b. What is the sunk cost in this situation?
The sunk cost is fill in the blank 1 of 1$.
Step by step
Solved in 4 steps
