# Accounting

A company is considering replacing an old machine which had an initial cost of \$100,000 and has \$75,000 of accumulated depreciation to date.The company is considering purchasing a new machine which costs \$195,000.The old machine could be sold for \$20,000.The annual variable production costs associated with the old machine are estimated to be \$10,000 per year for five years.The annual variable production costs for the new machine are estimated to be \$2,000 per year for five years.Should the company replace the old machine and what is the sunk cost in this situation?

A. Yes; sunk cost = \$40,000
B. Yes; sunk cost = \$20,000
C. Yes; sunk cost = \$100,000
D. No; sunk cost = \$25,000

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