A company is considering replacing an old piece of machinery, which cost $599,300 and has $348,300 of accumulated depreciation to date, with a new machine that has a purchase price of $483,800. The old machine could be sold for $64,600. The annual variable production costs associated with the old machine are estimated to be $156,700 per year for eight years. The annual variable production costs for the new machine are estimated to be $101,700 per year for eight years.

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 562ab309000bf85_1	$fill in the blank 562ab309000bf85_2	$fill in the blank 562ab309000bf85_3
Costs:
Purchase price	fill in the blank 562ab309000bf85_4	fill in the blank 562ab309000bf85_5	fill in the blank 562ab309000bf85_6
Variable productions costs (8 years)	fill in the blank 562ab309000bf85_7	fill in the blank 562ab309000bf85_8	fill in the blank 562ab309000bf85_9
Income (Loss)	$fill in the blank 562ab309000bf85_10	$fill in the blank 562ab309000bf85_11	$fill in the blank 562ab309000bf85_12

a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.

Continue with the old machineReplace the old machine

b. What is the sunk cost in this situation?

The sunk cost is the $fill in the blank fcfd2bfc902d02a_1.