Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $603,000 and has $348,400 of accumulated depreciation to date, with a new machine that has a purchase price of $484,200. The old machine could be sold for $62,100. The annual variable production costs associated with the old machine are estimated to be $157,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,800 per year for 8 years. > 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 Revenues: Proceeds from sale of old machine. Costs: Purchase price Variable productions costs (8 years) Income (Loss) Replace Old Machine Machine (Alternative 1) (Alternative 2) Continue with Old The sunk cost is $ 000 b. What is the sunk cost in this situation? Differential Effects (Alternative 2) Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Q000
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $603,000 and has $348,400 of accumulated depreciation to date, with a new machine that has a purchase price of $484,200. The old machine could be sold for $62,100. The annual variable production costs associated with the old machine are estimated to be $157,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,800 per year for 8 years. > 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 Revenues: Proceeds from sale of old machine. Costs: Purchase price Variable productions costs (8 years) Income (Loss) Replace Old Machine Machine (Alternative 1) (Alternative 2) Continue with Old The sunk cost is $ 000 b. What is the sunk cost in this situation? Differential Effects (Alternative 2) Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Q000
Essentials Of Business Analytics
1st Edition
ISBN:9781285187273
Author:Camm, Jeff.
Publisher:Camm, Jeff.
Chapter6: Data Mining
Section: Chapter Questions
Problem 11P
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