1.Raven Company is considering replacing equipment which originally cost $500,000 and which has $460,000 accumulated depreciation to date. A new machine will cost $790,000. What is the sunk cost in this situation?
a. $330,000
b. $500,000
c. $40,000
d. $290,000
2. A business received an offer from an exporter for 20,000 units of product at $15 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available:
- Domestic unit sales price $21
- Unit manufacturing costs:
- Variable 12
- Fixed 5
What is the differential revenue from the acceptance of the offer?
a. $300,000
b. $420,000
c. $120,000
d. $240,000