be sold for $62,800. The annual variable production costs associated with the old machine are estimated to be $156,800 per year for 8 years. The annual variable production costs for the new mac ted to be $100,900 per year for 8 years. epare 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 te a loss. Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Line Item Description ues: oceeds from sale of old machine # Continue with Old Machine (Alternative 1) Replace Old Machine Differential Effects (Alternative 2) (Alternative 2)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Homework help. Chapter 25, number 6. Need help filling in the blanks. Thank you!

Machine Replacement Decision
A company is considering replacing an old plece of machinery, which cost $601,500 and has $349,600 of accumulated depreciation to date, with a new machine that has a purchase price of $483,700. The old machine
could be sold for $62,800. The annual variable production costs associated with the old machine are estimated to be $156,800 per year for 8 years. The annual variable production costs for the new machine are
estimated to be $100,900 per year for 8 years.
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.
Costs:
Line Item Description
Revenues:
Proceeds from sale of old machine
Purchase price
Variable productions costs (8 years)
Profit (loss)
Feedback
Differential Analysis
Continue with (Alt. 1) or Replace (Alt. 2) Old Machine
December 10
Check My Work
a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.
Replace the old machine
Feedback
►Check My Work
Continue with Replace Old Machine Differential Effects
(Alternative 2) (Alternative 2)
Old Machine
(Alternative 1)
✓
b. What is the sunk cost in this situation?
The sunk cost is $
Transcribed Image Text:Machine Replacement Decision A company is considering replacing an old plece of machinery, which cost $601,500 and has $349,600 of accumulated depreciation to date, with a new machine that has a purchase price of $483,700. The old machine could be sold for $62,800. The annual variable production costs associated with the old machine are estimated to be $156,800 per year for 8 years. The annual variable production costs for the new machine are estimated to be $100,900 per year for 8 years. 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. Costs: Line Item Description Revenues: Proceeds from sale of old machine Purchase price Variable productions costs (8 years) Profit (loss) Feedback Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Check My Work a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Replace the old machine Feedback ►Check My Work Continue with Replace Old Machine Differential Effects (Alternative 2) (Alternative 2) Old Machine (Alternative 1) ✓ b. What is the sunk cost in this situation? The sunk cost is $
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