A company is considering replacing an old piece of machinery, which cost $$597,300$ and has $$348,500$ of accumulated depreciation to date, with a new machine that has a purchase price of $$483,400.$ The old machine could be sold for $$63,600.$ The annual variable production costs associated with the old machine are estimated to be $$155,400$ per year for $8$ years. The annual variable production costs for the new machine are estimated to be $$101,900$ per year for $8$ years.

a$.1$ Prepare a differential analysis dated December $10$ to determine whether to continue with $($Alternative $1)$ or replace $($Alternative $2)$ the old machine. If an amount is zero, enter $"0".$ If required, use a minus sign to indicate a loss.

Differential Analysis

Continue with $($Alt$.1)$ or Replace $($Alt$.2)$ Old Machine December $10$

Costs:

Purchase price

Variable

productions

costs $(8$ years$)$

Profit $($loss$)$

$$

$

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 $