Homework Answers
Ans:
A.
|
Differential analysis |
|||
|
Continue with old machine (Alt 1) |
Replace Old machine (Alt 2) |
Differential effect on income |
|
|
Revenue |
|||
|
Proceeds from sale of old machine |
0 |
61300 |
61300 |
|
Costs |
|||
|
Purchase price |
0 |
-486300 |
-486300 |
|
Variable production cost |
1245600 |
-792000 |
453600 |
|
Income (Loss) |
1245600 |
-1217000 |
28600 |
The company should replace the old machine
|
b. |
Sunk Cost=$597000-$352,200=$244800 |
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