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	Continue w/old machine	Replace old machine	Differential Effect
Revenues:
Proceeds from sale
Total
Costs:
Purchase price
Variable production cost
Income (Loss)
	Continue w/old machine	Replace old machine	Differential Effect
Revenues:
Proceeds from sale
Total
Costs:
Purchase price
Variable production cost
Income (Loss)

EX 24-9 Machine replacement decision A company is considering replacing an old piece of machinery, which cost $600,000 and has $350,000 of accumulated depreciation to date, with a new machine that costs $485,000. The old equipment could be sold for $63,000. The annual variable production costs as- sociated with the old machine are estimated to be $157,000 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,500 per year for eight years. a. Prepare a differential analysis dated October 3, 2012, to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. b. What is the sunk cost in this situation