Machine Replacement Decision

year for $8$ years.

loss.

Differential Analysis

Continue with $($Alt$.1)$ or Replace $($Alt$.2)$ Old Machine

December $10$

Continue with

Replace Old Machine Differential Effects

Line Item Description

Old Machine

$($Alternative $2)$

$($Alternative $2)$

$($Alternative $1)$

Revenues:

Proceeds from sale of old machine $!$

Costs:

Purchase price

Variable production costs $(8$ years$)$

Profit $($loss$)$

a$\mathrm{.}2$ Determine whether to continue with $($Alternative $1)$ or replace $($Alternative $2)$ the old machine.

b$.$ What is the sunk cost in this situation?

The sunk cost is $