A company is considering replacing an old piece of machinery, which cost $596,600 and has $365,600 of accumulated depreciation to date, with a new machine that has a purchase price of $556,050. The old machine could be sold for $221,500. The annual variable production costs associated with the old machine are estimated to be $62,750 per year for eight years. The annual variable production costs for the new machine are estimated to be $18,200 per year for eight years.

	Required:
a.	Prepare a differential analysis dated September 13 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
b.	Determine whether the company should continue with (Alternative 1) or replace (Alternative 2) the old machine.
c.	What is the sunk cost in this situation?

Labels:
Cash flows from investing activities
Costs
Revenues
Amount Descriptions:
Gain on sale of investments
Income (loss)
Loss on sale of investments
Proceeds from sale of old machine
Purchase price
Variable production costs (8 years)

2. Determine whether the company should continue with (Alternative 1) or replace (Alternative 2) the old machine. (choose one of the following)

a. Continue with old machine

b. Replace the old machine

3. What is the sunk cost in this situation? (choose one of the following)

a. Cost of the new machine

b. Future variable production costs

c. Book value of the old machine

a. Prepare a differential analysis dated September 13 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "o".A colon () will automatically appear if required. Differential Analysis Continue with (Alternative. 1) or Replace (Alternative. 2) Old Machine September 13 Continue with Replace Old Differential Old Machine Machine Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) (Label) (Label)