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Question 2 Management of Mine Corporation is considering whether to purchase a new modet 11370 machine costing $441,000 or a new model 1240 machine costing
Question 2 Management of Mine Corporation is considering whether to purchase a new modet 11370 machine costing $441,000 or a new model 1240 machine costing $387, 0oo to replace a machino that was purchased 7 years ago for $429,000. The old machine was used to make product M25A untl it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model H24O machine. It has less capacity than the new model H370 machine, but its capacity is sufficient to continue making product M2SA. Management aiso considered, but rejected, the aiternative of simply dropplng product M25A. If that was done, instead of investing $387,000 in the new machine, the money could be invested in a project that would return a total of $430,000. Required: in making the decision to buy the model 240 machine rather than the model 370 machine, how much was: a. The sunk cost? b. The opportunity cost? c. The differential cost
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