Question

A company is considering replacing an old piece of machinery, which cost $560,000 and has $320,000 of accumulated depreciation to date, with a new machine that costs $460,000.
The old equipment could be sold for $78,000. The variable production costs associated with the old machine are estimated to be $170,000 for eight years. The variable production costs for the new machine are estimated to be $110,000 for eight years.
a. Determine the total and annualized differential income or loss anticipated from replacing the old machine.
b. What is the sunk cost in this situation?



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  • CreatedJuly 17, 2012
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