A company is considering replacing an old piece of machinery, which cost $597,700 and has $347,600 of accumulated depreciation to date, with a new machine that has a purchase price of $484,800. The old machine could be sold for $63,100. The annual variable production costs associated with the old machine are estimated to be $158,800 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,800 per year for eight years.
a.1 Prepare a differential analysis dated September 13, to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
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 | $ | $ | $ |
Costs: | |||
Purchase price | |||
Variable productions costs (8 years) | |||
Income (Loss) | $ | $ | $ |
b. What is the sunk cost in this situation?
The sunk cost is the $.
Differential Analysis | |||
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) | |||
13-Sep | |||
Continue with Old Machine (Alternative 1) | Replace Old Machine (Alternative 2) | Differential Effect on Income (Alternative 2) | |
Revenues: | |||
Proceeds from sale of old machine | $0.00 | $63,100.00 | $63,100.00 |
Costs: | |||
Purchase price | $0.00 | -$484,800.00 | -$484,800.00 |
Variable production costs(8 years) | -$1,270,400.00 | -$798,400.00 | $472,000.00 |
Income (Loss) | -$1,270,400.00 | -$1,220,100.00 | $50,300.00 |
The company should replace the old machine. |
The sunk cost is the (597700-347600)=$250100 |
A company is considering replacing an old piece of machinery, which cost $597,700 and has $347,600...
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $597,700 and has $351,600 of accumulated depreciation to date, with a new machine that has a purchase price of $486,800. The old machine could be sold for $61,400. The annual variable production costs associated with the old machine are estimated to be $155,800 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,800 per year for...
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $599,300 and has $352,900 of accumulated depreciation to date, with a new machine that has a purchase price of $486,400. The old machine could be sold for $62,600. The annual variable production costs associated with the old machine are estimated to be $156,800 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,400 per year for...
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $600,800 and has $351,900 of accumulated depreciation to date, with a new machine that has a purchase price of $485,900. The old machine could be sold for $61,200. 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 $101,300 per year for...
A company is considering replacing an old piece of machinery, which cost $602,500 and has $347,800 of accumulated depreciation to date, with a new machine that has a purchase price of $486,900. The old machine could be sold for $63,500. The annual variable production costs associated with the old machine are estimated to be $157,400 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,900 per year for eight years. a....
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...
A company is considering replacing an old piece of machinery, which cost $598,900 and has $350,700 of accumulated depreciation to date, with a new machine that has a purchase price of $486,400. The old machine could be sold for $61,600. The annual variable production costs associated with the old machine are estimated to be $156,500 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,200 per year for eight years. a.1...
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...
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $597,100 and has $348,000 of accumulated depreciation to date, with a new machine that has a purchase price of $484,500. The old machine could be sold for $64,000. The annual variable production costs associated with the old machine are estimated to be $156,000 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,100 per year for...
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 $600,900 and has $351,600 of accumulated depreciation to date, with a new machine that has a purchase price of $484,200. The old machine could be sold for $64,100. The annual variable production costs associated with the old machine are estimated to be $156,400 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,100 per year for...