12-3

Torrey Products Inc. is considering replacing an old piece of machinery, which cost $350,000 and has $115,000 of accumulated depreciation to date, with a new machine that costs $420,000. The old equipment could be sold for $90,000. The annual variable production costs associated with the old machine are estimated to be $75,000 for ten years. The annual variable production costs for the new machine are estimated to be $39,000 for ten years.

a. Determine the total and annualized differential income or loss anticipated from replacing the old machine. Enter all amounts as positive numbers.

Net differential	SelectincomelossItem 1	$
Annual differential	SelectincomelossItem 3	$

b. What is the sunk cost in this situation? $ , Selectthe cost of the new equipment.the sales proceeds of the present equipment.the book value of the present equipment.the accumulated depreciation of the present equipment.Item 6