< Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $601,200 and has $348,000 of accumulated depreciation to date, with a new machine that has a purchase price of $485,600. The old machine could be sold for $63,400. The annual variable production costs associated with the old machine are estimated to be $158,600 per year for 8 years. The annual variable production costs for the new machine are estimated to be $101,300 per year for 8 years. a.1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Continue with Line Item Description Old Machine (Alternative 2) Replace Old Machine Differential Effects (Alternative 2) (Alternative 1) Revenues: Proceeds from sale of old machine Costs: Purchase price 63,400 63,400 -485,600 -485,600 Variable productions costs (8 years) Profit (loss) Feedback Check My Work Partially correct a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Replace the old machine Feedback Check My Work Compare the differential revenues and differential costs of continuing vs. replacing. Which one has the greatest positive differential effect on income? b. What is the sunk cost in this situation? The sunk cost is $ Feedback