Differential analysis
Continue with old machine (alt 1) or replace old machine (Alt 2)
September 13
Continue with old machine (Alternative 1) | Replace old machine (Alternative 2) | Differential effect on income (Alternative 2) | |
Revenues | |||
Proceeds from sale of old machine | 61400 | 61400 | |
Costs | |||
Purchase price | -486800 | -486800 | |
Variable production costs (8 Years) | -1246400 | -798400 | 448000 |
Income (loss) | -1246400 | -1223800 | 22600 |
2) Replace old machine
b) Sunk cost = (597700-351600) = 246100
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Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $602,200 and has $347,000 of accumulated depreciation to date, with a new machine that has a purchase price of $486,200. The old machine could be sold for $61,400. The annual variable production costs associated with the old machine are estimated to be $156,200 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,600 per year for...
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Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $597,000 and has $352,200 of accumulated depreciation to date, with a new machine that has a purchase price of $486,300. The old machine could be sold for $61,300. The annual variable production costs associated with the old machine are estimated to be $155,700 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,000 per year for...
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $600,200 and has $351,800 of accumulated depreciation to date, with a new machine that has a purchase price of $483,400. The old machine could be sold for $64,700. The annual variable production costs associated with the old machine are estimated to be $156,600 per year for eight years. The annual variable production costs for the new machine are estimated to be $102,400 per year for...
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $601,400 and has $352,300 of accumulated depreciation to date, with a new machine that has a purchase price of $483,200. The old machine could be sold for $61,300. The annual variable production costs associated with the old machine are estimated to be $158,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,600 per year for...