Question

EXERCISE 1-5 Differential, Sunk, and Opportunity Costs LO1-5 an old inefficient X-ray Northeast Hospital's Radiology Department is considering replacing machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer Required: For each of the items below, indicate by placing an X in the appropriate column whether it should be considered a differential cost, a sunk cost, or an opportunity cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, leave all columns blank. Differential Sunk Opportunity Item Cost Cost Cost Ex. Cost of X-ray film used in the old machine X 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 Laboratory 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	Sunk Cost	Opportunity cost
1	Cost of old X ray machine		X
2	The salary of head of radiology department
3	The salary of head of Laboratory department
4	Cost of new color laser printer	X
5	Rent on the space of radiology
6	The cost of maintaining the old machine	X
7	Benefits from the new DNA analyzer			X
8	Cost of electricity to run the X ray machine	X

Note : The blanks columns are NA and need to be leave blank