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A company is considering replacing an old piece of machinery, which cost $603,000 and has $352,500 of accumulated depreciation to date, with a new
A company is considering replacing an old piece of machinery, which cost $603,000 and has $352,500 of accumulated depreciation to date, with a new machine that has a purchase price of $483,100. The old machine could be sold for $61,000. The annual variable production costs associated with the old machine are estimated to be $158,300 per year for 8 years. The annual variable production costs for the new machine are estimated to be $100,100 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 Continue with Line Item Description Old Machine (Alternative Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) 1) Revenues: Proceeds from sale of old machine 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. Feedback Check My Work b. What is the sunk cost in this situation? The sunk cost is $
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