replacing an old piece of machinery, which cost $168,000 and has $88,000 of accumulated depreciation to date, with a new machine that has a purchase price of $107,900.
A company is considering replacing an old piece of machinery, which cost $168,000 and has $88,000 of
a. Prepare a differential analysis dated April 29 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Differential Analysis | |||
| Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) | |||
| April 29 | |||
| Continue with Old Machine (Alternative 1) |
Replace Old Machine (Alternative 2) |
Differential Effects (Alternative 2) |
|
| Revenues: | |||
| Proceeds from sale of old machine | $fill in the blank fc7ec8fd1043fda_1 | $fill in the blank fc7ec8fd1043fda_2 | $fill in the blank fc7ec8fd1043fda_3 |
| Costs: | |||
| Purchase price | fill in the blank fc7ec8fd1043fda_4 | fill in the blank fc7ec8fd1043fda_5 | fill in the blank fc7ec8fd1043fda_6 |
| Variable production costs (8 years) | fill in the blank fc7ec8fd1043fda_7 | fill in the blank fc7ec8fd1043fda_8 | fill in the blank fc7ec8fd1043fda_9 |
| $fill in the blank fc7ec8fd1043fda_10 | $fill in the blank fc7ec8fd1043fda_11 | $fill in the blank fc7ec8fd1043fda_12 |
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 $fill in the blank 51b1a3fbefb5074_1.
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
