A company is considering replacing an old piece of machinery, which cost $599,900 and has $347,000 of accumulated depreciation to date, with a new machine that has a purchase price of $483,600. The old machine could be sold for $61,300. The annual variable production costs associated with the old machine are estimated to be $155,700 per year for 8 years. The annual variable production costs for the new machine are estimated to be $101,300 per year for 8 years.

A. 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 "O". If required, use a minus sign to indicate a loss.

Line item description	Continue with old machine (alternative 1)	replace old machine (alternative 2)	Differential effects (alternative 2)
proceeds from sales of old machine	?	?	?
purchase price	?	?	?
Variable production costs (8 years)	?	?	?
Profit (loss)	?	?	?

B. Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. C. What is the sunk cost in this situation?