Machine Replacement Decision

Creekside Products Inc. is considering replacing an old piece of machinery, which cost $1,982,000 and has $1,163,000 of accumulated depreciation to date, with a new machine that costs $1,490,400. The old machine could be sold for $235,200. The annual variable production costs associated with the old machine are estimated to be $509,100 for eight years. The annual variable production costs for the new machine are estimated to be $336,000 for eight years.

a. Determine the total and annualized differential income or loss anticipated from replacing the old machine.

Net differential	incomelossincome	$fill in the blank 2
Annual differential	incomelossincome	$fill in the blank 4

b. What is the sunk cost in this situation? $fill in the blank 5,

the cost of the new equipment.the sales proceeds of the present equipment.the book value of the present equipment.the accumulated depreciation of the present equipment.