Explain his decision making error. include relevant and sunk costs as they apply to the situation. Describe as specifically as possible, using the financial information included below, how incremental analysis could be used to support the decision process. Assume the existing machine could be sold for $75,000.

Nora is a production manager at an office furniture manufacturer. Nora manages the metal fabrication area. She read an article about a new piece of equipment that would dramatically reduce her division's costs. Nora thought the machine was a great prospect, so she brought the article to the plant manager, Phillip David. Their conversation follows: Nora: Phillip, I thought you would like to see this article on the Bendomatic 2000; they've made some fantastic changes that could save us millions of dollars. I think we can purchase it for $2 million from a regional distributor of Bendomatic machines. I think we will save $175,000 in variable operating costs each year of its 10-year life. The current machine operation costs are twice that, at $350,000 per year. There's a good chance we can have the new machine operational before the end of this year. Phillip: I appreciate your interest, Nora, but I actually have been aware of the new machine for two months. The problem is that we just bought a new machine last year. We spent $1.8 million on that machine, and it was supposed to last us 12 years. If we replace it before the end of the year, we would have to write its book value off of the books for a huge loss. If I go to top management now and say that I want a new machine, they will fire me. I think we should use our existing machine for a couple of years, and then when it becomes obvious that we have to have a new machine, I will make the proposal