Machine Replacement Decision A company is considering replacing an old piece machinery, which cost $597,100 and has $349,800 of accumulated depreciation to date, with a new machine that has a purchase price of $486,900. The old machine could be sold for $63,100. The annual variable production costs associated with the old machine are estimated to be $158,000 per year for eight years. The annual variable production costs for the new machine are estimated to be 598,800 per year for eight years. a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "o". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Continue Replace Differential with old old Effect Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine 63,100 63,100 Costs: Purchase price - 136,900 -186,900 Variable productions costs (8 years) Income (Loss) Feedback Check My Work a. For the continue and replace alternatives subtract the costs from the revenues. Multiply the variable production cost 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. Determine whether to continue with (Alternative 1) or replace Alternative 2) the old machine. Replace the old machine Feedback Check My Work Correct b. What is the sunk cost in this situation? The sunk cost is