QUESTION TO ANSWER: WHAT IS THE SUNK COST IN THIS SITUATION? 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 $2.$ We will be replacing $($Alternative $2)$ the old machine. QUESTION TO ANSWER: WHAT IS THE SUNK COST IN THIS SITUATION?