( I ONLY NEED TO KNOW WHAT THE SUNK COST IS)

A company is considering replacing an old piece of machinery, which cost $602,300 and has $353,000 of accumulated depreciation to date, with a new machine that has a purchase price of $487,000. The old machine could be sold for $63,300. The annual variable production costs associated with the old machine are estimated to be $156,100 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,900 per year for eight years.

a.1 Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
May 29
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Proceeds from sale of old machine	$0	$63300	$63300
Costs:
Purchase price	0	-487000	-487000
Variable productions costs (8 years)	-1248800	-807200	441600
Profit (Loss)	$-1248800	$-1230900	$17900

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.

Compare the differential revenues and differential costs of continuing vs. replacing. Which one has the greatest positive differential effect on income?

b. What is the sunk cost in this situation?

The sunk cost is $.