Differential, Sunk and Opportunity Costs: Costs may be classified as differential cost, sunk cost and opportunity cost. This classification is made for decision making purposes. To indicate whether the cost items should beconsidered as a differential cost, a sunk cost or an opportunity cost in the decision to replace the old X-ray machine with a new machine respectively.

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Chapter 1, Problem 5E

To determine

Differential, Sunk and Opportunity Costs: Costs may be classified as differential cost, sunk cost and opportunity cost. This classification is made for decision making purposes.

To indicate whether the cost items should beconsidered as a differential cost, a sunk cost or an opportunity cost in the decision to replace the old X-ray machine with a new machine respectively.

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Differential, Sunk, and Opportunity Costs Northeast Hospital’s Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital’s management to buy a new DNA analyzer. Required: For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item leave all columns blank.

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