Down East Chemicals is considering replacing its existing computer system with a new computer system. The new system can offer considerable savings in computer processing and inventory management costs. Information about the existing system and the new system follow:

Existing Computer

New Computer

Original cost

$10,000

$15,000

Annual operating cost

$3,500

$2,000

Accumulated depreciation

$6,000

Current salvage value of the existing system

$4,000

Remaining life in 5 years

5 years

Salvage value in 5 years

$0

$0

Annual depreciation

$2,000

$3,000

Sunk costs include:

a.) the original cost of the existing system.

b.) the annual operating cost of the new system.

c.) the original cost of the new system.

d.) the current salvage value of the existing system.