Machine Replacement DecisionA company is considering replacing an old piece ofmachinery, which cost $600,000 and has $347,700 ofaccumulated depreciation to date, with a new machinethat has a purchase price of $483,000. The old machinecould be sold for $62,300. The annual variableproduction costs associated with the old machine areestimated to be $157,200 per year for eight years. Theannual variable production costs for the new machineare estimated to be $99,200 per year for eight years.a.1 Prepare a differential analysis dated May 29 todetermine whether to continue with (Alternative 1) orreplace (Alternative 2) the old machine. If an amount iszero, enter "0". If required, use a minus sign to indicatea loss.Differential AnalysisContinue with Old Machine (Alt. 1) or Replace OldRevenues:Proceeds from sale of old machine.Costs:Machine (Alt. 2)May 29Purchase priceVariable productions costs (8 years)Profit (Loss)Continuewith OldReplaceOldDifferentialMachineMachineEffects(Alternative 1) (Alternative 2) (Alternative 2)a.2 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 $

Requirement:-1 Preparation of a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine as follows:-Differential Analysis Continue with Old Machine (Alternative. 1) or Replace Old Machine (Alternative. 2) May-29 Continue with Old Machine Replace Old Machine Differential Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenue: Proceeds from sale of old machine 0 62300 62300 Costs: Purchase price 0 -483000 -483000 Variable manufacturing costs (8 years) -1257600 -793600 464000 Total costs -1257600 -1276600 -19000 Income (loss) -1257600 -1214300 43300Requirement:-2 The company should replace the old machineRequirement:-3 The book value of the old machinery is sunk cost as it is irrelevent.

Business

Accounting

Purchase price Variable productions costs (8 years) Profit (Loss) 000 a.2 Determine whether to continue with (Alt or replace (Alternative 2) the old machine. b. What is the sunk cost in this situation?

Purchase price Variable productions costs (8 years) Profit (Loss) 000 a.2 Determine whether to continue with (Alt or replace (Alternative 2) the old machine. b. What is the sunk cost in this situation?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Subject : Accounting
hello i want the answer please provide with correct option