Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $599,200 and has $348,100 of accumulated depreciation to date, with a new machine that has a purchase price of $483,300. The old machine could be sold for $62,700. The annual variable production costs associated with the old machine are estimated to be $155,200 per year for eight years. The annual variable production costs for the new machine are estimated to be $98,900 per year for eight years.

Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $599,200 and has $348,100 of accumulated depreciation to date, with a new machine that has a purchase price of $483,300 The old machine could be sold for $62,700. The annual variable production costs associated with the old machine are estimated to be $155,200 per year for eight years. The annual variable production costs for the new machine are estimated to be $98,900 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 Replace Old Machine (Alternative 1) (Alternative 2) (Alternative 2) Continue with Old Machine Differential Effect on Income Revenues Proceeds from sale of old machine Costs Purchase price Variable productions costs (8 years) Income (Loss) Determlne whether to continue with (Alternatlve 1) or replace (Alternative 2) the old machlne b. What is the sunk cost in this situation? The sunk cost is $