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A printer is considering replacing an old machine, which he purchased for P1,50,000 three years ago, with some labor-saving equipment. The old machine is
A printer is considering replacing an old machine, which he purchased for P1,50,000 three years ago, with some labor-saving equipment. The old machine is being depreciated at P15,000 a year. The following alternative equipment options are available for consideration. Machine A. The purchase price of machine A is P 2,50,000 and yearly cash operating costs are P50,000. Machine B. The purchase price of machine B is P 2,80,000 and yearly cash operating costs are P45,000. Present formula (if necessary), show your solutions and highlight your answer. (a) What are the incremental costs, if any, in this alternative-choice situation? (4 marks) (b) What are the sunk costs, if any, in this situation? (1 mark) Use the editor to format your answer
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