Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $600,300 and has $352,400 of accumulated depreciation to date, with a new machine that has a purchase price of $485,600. The old machine could be sold for $61,200. The annual variable production costs associated with the old machine are estimated to be $156,300 per year for eight years. The annual variable production costs for the n machine are estimated to be $100,200 per year for eight years. a.1 Prepare a differential analysis dated May 29 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 indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 29 Continue Replace with Old Old Differential Machine Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Variable productions costs (8 years) Profit (Loss)
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $600,300 and has $352,400 of accumulated depreciation to date, with a new machine that has a purchase price of $485,600. The old machine could be sold for $61,200. The annual variable production costs associated with the old machine are estimated to be $156,300 per year for eight years. The annual variable production costs for the n machine are estimated to be $100,200 per year for eight years. a.1 Prepare a differential analysis dated May 29 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 indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 29 Continue Replace with Old Old Differential Machine Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Variable productions costs (8 years) Profit (Loss)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Diff Analysis & Product Pricing:
Transcribed Image Text: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 piece of machinery, which cost $600,300 and has $352,400 of accumulated depreciation to date, with a new machine that has a purchase price of $485,600. The old
machine could be sold for $61,200. The annual variable production costs associated with the old machine are estimated to be $156,300 per year for eight years. The annual variable production costs for the new
machine are estimated to be $100,200 per year for eight years.
a.1 Prepare a differential analysis dated May 29 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 Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
May 29
Continue
Replace
with Old
Old
Differential
Machine
Machine
Effects
(Alternative 1) (Alternative 2) (Alternative 2)
Revenues:
Proceeds from sale of old machine
Costs:
Purchase price
Variable productions costs (8 years)
Profit (Loss)
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