Machine Replacement Decision
A company is considering replacing an old piece of machinery, which cost $601,100 and has $350,100 of
a.1 Prepare a differential analysis dated September 13, to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. 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) | |||
September 13 | |||
Continue with Old Machine (Alternative 1) | Replace Old Machine (Alternative 2) | Differential Effect on Income (Alternative 2) | |
Revenues: | |||
Proceeds from sale of old machine | $fill in the blank c37c44fcd021056_1 | $fill in the blank c37c44fcd021056_2 | $fill in the blank c37c44fcd021056_3 |
Costs: | |||
Purchase price | fill in the blank c37c44fcd021056_4 | fill in the blank c37c44fcd021056_5 | fill in the blank c37c44fcd021056_6 |
Variable productions costs (8 years) | fill in the blank c37c44fcd021056_7 | fill in the blank c37c44fcd021056_8 | fill in the blank c37c44fcd021056_9 |
Income (Loss) | $fill in the blank c37c44fcd021056_10 | $fill in the blank c37c44fcd021056_11 | $fill in the blank c37c44fcd021056_12 |
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 the $fill in the blank 93544a08f038032_1.
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