Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $$600,400$ and has $$352,300$ of accumulated depreciation to date, with a new machine that

purchase price of $$486,400.$ The old machine could be sold for $$64,100.$ The annual variable production costs associated with the old machine are estimated to be

$$156,100$ per year for $8$ years. The annual variable production costs for the new machine are estimated to be $$101,800$ per year for $8$ years.

a$.$ Prepare a differential analysis dated April $29$ to determine whether to Continue with Old Machine $($Alternative $1)$ or Replace Old Machine $($Alternative $2).$ If an amount is

zero, enter $"0".$ For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis

Continue with Old Machine $($Alt$.1)$ or Replace Old Machine $($Alt$.2)$

April $29$

Determine whether to continue with $($Alternative $1)$ or replace $($Alternative $2)$ the old machine.

b$.$ What is the sunk cost in this situation?

The sunk cost is $