Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $599,200 and has $347,700 of accumulated depreciation to date, with a new machine that has a purchase price of $484,900. The old machine could be sold for $61,900. The annual variable production costs associated with the old machine are estimated to be $156,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,700 per year for eight years.

a.1 Prepare a differential analysis dated May 29 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 Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
May 29
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Proceeds from sale of old machine	$fill in the blank 0ca803fd405cf90_1	$fill in the blank 0ca803fd405cf90_2	$fill in the blank 0ca803fd405cf90_3
Costs:
Purchase price	fill in the blank 0ca803fd405cf90_4	fill in the blank 0ca803fd405cf90_5	fill in the blank 0ca803fd405cf90_6
Variable productions costs (8 years)	fill in the blank 0ca803fd405cf90_7	fill in the blank 0ca803fd405cf90_8	fill in the blank 0ca803fd405cf90_9
Profit (Loss)	$fill in the blank 0ca803fd405cf90_10	$fill in the blank 0ca803fd405cf90_11	$fill in the blank 0ca803fd405cf90_12

a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Continue with the old machine

b. What is the sunk cost in this situation?

The sunk cost is $fill in the blank 5baae0031fea018_1.