Question

EXERCISE 2-8 Differential, Opportunity, an Northwest Hospital is a full-se emergency room care to outpat replacing an old inefficient X-ray Terential, Opportunity, and Sunk Costs [LU] ospital is a full-service hospital that provides everything from majors ency room care to outpatient clinics. The hospital s Radio The hospital's Radiology Department is cons mold inefficient X-ray machine with a state-of-the-art digital X-ray machine would provide higher quality X-rays in less time and at a lower cost per X-ray less power and would use a color laser printer to produce easily readabi I investing the funds in the new X-ray machine, the Laboratory Den hospital's management to buy a new DNA analyzer. major surgery and is considering achine. The new X-ray. It would readable X-ray also require less power and wo images. Instead of investing the funds in the new X-ray oratory Department is Required: For each of the items below, indicate by pla be considered a differential cost, an opportunity cost, or a sunk ay machine with a new machine. If none of the categories apply for a particular item all columns blank. the items below, indicate by placing an X in the appropriate column whether its yhether it should decision to replace the Item Differential Opportunity Sunk Cost Cost Cost Ex. Cost of X-ray film used in the old machine 1. Cost of the old X-ray machine. 2. The salary of the head of the Radiology Department 3. The salary of the head of the Pediatrics Department 4. Cost of the new color laser printer. 5. Rent on the space occupied by Radiology.. 6. The cost of maintaining the old machine .... 7. Benefits from a new DNA analyzer 8. Cost of electricity to run the X-ray machines ...

Answer 1

	Item	Differential Cost	Opportunity Cost	Sunk Cost
Ex	Cost of x- ray film used in the old machine	X
1	Cost of the old x- ray machine			X
2	The salary of the head of the radiology dept.
3	The salary of the head of the pediatrics dept
4	Cost of the new color laser printer	X
5	Rent on the space occupied by radiology
6	The cost of maintaining the old machine	X
7	Benefits from a new DNA anaylzer		X
8	Cost of electricity to run the x-ray machines	X

Explanation

1) Differential cost means difference between the cost or level of output of two different alternative decisions.

2) opportunity cost are not the real cost, it is simply profit loss when other alternative is used.

3) Sunk cost is the cost that has already occured and can not be recover at any stage.