A company is considered replacing an old piece of machinery which cost 600,000 and has 350,000 of accumulated depreciation to date, with a new machine that costs 528,000. the old machine could be sold for 82,000. The annual variable production costs associated with the old machine are estimated to be 167,000 per year for eight years. The annual variable production costs for the new machine are estimated to be 109,000 per year for eight years.
a. prepare a differential analysis dated September 11, 2014 to determine whether to continue with or replace the old machine
b. what is the sunk cost in this situation?