Machine Replacement Decision Creekside Products Inc. is considering replacing an old piece of machinery, which...
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Machine Replacement Decision Creekside Products Inc. is considering replacing an old piece of machinery, which cost $4,329,000 and has $2,539,000 of accumulated depreciation to date, with a new machine that costs $3,255,200. The old machine could be sold for $514,400. The annual variable production costs associated with the old machine are estimated to be $1,219,200 for eight years. The annual variable production costs for the new machine are estimated be $841,200 for eight years. a. Determine the total and annualized differential income or loss anticipated from replacing the old machine. Net differential income 3,988,80 X Annual differential income b. What is the sunk cost in this situation? the book value of the present equipment. Feechek Check My Work a. Follow Exhibit 9 in the text. Determine the costs to continue with the old machine with the old machine for eight years at the current amount. Determine the costs with the replacement machine. Determine the effect of the purchase price of the replacement and the sale proceeds of the old machine. b. Remember that the book value of the old equipment is a sunk cost
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