EXERCISE 1-5 Differential, Sunk, and Opportunity Costs L01-5 Northeast Hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer. Required: For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, leave all columns blank. Item Ex. Cost of X-ray film used in the old machine.. 1. Cost of the old X-ray machine 2. The salary of the head of the Radiology Department.... 3. The salary of the head of the Laboratory Department... 4. Cost of the new color laser printer.... 5. Rent on the space occupied by Radiology.. The cost of maintaining the old machine 6. 7. Benefits from a new DNA analyzer. 8. Cost of electricity to run the X-ray machines. pr. Differential Sunk Opportunity Cost Cost Cost X
EXERCISE 1-5 Differential, Sunk, and Opportunity Costs L01-5 Northeast Hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer. Required: For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, leave all columns blank. Item Ex. Cost of X-ray film used in the old machine.. 1. Cost of the old X-ray machine 2. The salary of the head of the Radiology Department.... 3. The salary of the head of the Laboratory Department... 4. Cost of the new color laser printer.... 5. Rent on the space occupied by Radiology.. The cost of maintaining the old machine 6. 7. Benefits from a new DNA analyzer. 8. Cost of electricity to run the X-ray machines. pr. Differential Sunk Opportunity Cost Cost Cost X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:EXERCISE 1-5 Differential, Sunk, and Opportunity Costs L01-5
Northeast Hospital's Radiology Department is considering replacing an old inefficient X-ray machine
with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays
in less time and at a lower cost per X-ray. It would also require less power and would use a color laser
printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine,
the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer.
Required:
For each of the items below, indicate by placing an X in the appropriate column whether it should
be considered a differential cost, a sunk cost, or an opportunity cost in the decision to replace the
old X-ray machine with a new machine. If none of the categories apply for a particular item, leave
all columns blank.
Item
Ex. Cost of X-ray film used in the old machine.
1. Cost of the old X-ray machine
2.
The salary of the head of the Radiology Department....
3. The salary of the head of the Laboratory Department..
4. Cost of the new color laser printer....
5.
Rent on the space occupied by Radiology.
6. The cost of maintaining the old machine
Benefits from a new DNA analyzer....
8. Cost of electricity to run the X-ray machines.
7.
pr
Differential Sunk Opportunity
Cost Cost Cost
X
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