A company is considering replacing an old piece of machinery, which cost $617,500 and has $359,600 of accumulated depreciation to date, with a new machine that has a purchase price of $573,500. The old machine could be sold for $250,500. The annual variable production costs associated with the old machine are estimated to be $61,050 per year for eight years. The annual variable production costs for the new machine are estimated to be $18,150 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? 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. Score: 49/73 Differential Analysis Continue with Old Machine (Alternative. 1) or Replace Old Machine (Alternative. 2) September 13 1 Continue with Old Machine Replace Old Machine Differential Effect on Income 2 (Alternative 1) (Alternative 2) (Alternative 2) 3 Revenues: 4 Proceeds from sale of old machine $0.00 $250,500.00 $250,500.00 5 Costs: 6 Purchase price 0.00 (573,500.00) (573,500.00) 7 Variable production costs (8 years) 8 Income (Loss) Points: 12.08 / 18 Check My Work A. For the continue and replace alternatives subtract the costs from the revenues. Multiply the variable production costs for the eight-year life. Determine the differential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. B. Determine whether the company should continue with (Alternative 1) or replace (Alternative 2) the old machine. Correct Replace the old machine Continue with old machine Points: 1 / 1 C. What is the sunk cost in this situation? Cost of the new machine Correct Book value of the old machine Future variable production costs