Question

6. value 2.00 points Exercise 2-7 Differential, Opportunity, and Sunk Costs [LO2-7] Northwest Hospital is a full-service hospital that provides everything from major surgery and emergency room care to outpatient clinics. The hospital's Radiology Department is considering replacing an old inefficient X-ray machine with a state-of-the-art digital X-ray machine. The new machine would provide higher quality X-rays in less time and at a lower cost per X-ray. It would also require less power and would use a color laser printer to produce easily readable X-ray images. Instead of investing the funds in the new X-ray machine, the Laboratory Department is lobbying the hospital's management to buy a new DNA analyzer. Required: Classify each item as a differential cost, an opportunity cost, or a sunk cost in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, select "None". Item Cost Differential cost Ex. Cost of X-ray film used in the old machine 1. Cost of the old X-ray machine 2. The salary of the head of the Radiology Department 3. The salary of the head of the Pediatrics Department 4. Cost of the new color laser printer 5. Rent on the space occupied by Radiology 6. The cost of maintaining the old machine 7. Benefits from a new DNA analyzer 8. Cost of electricity to run the X-ray machines

Answer 1

Differential costs are those which are different amongst alternatives
Sunk costs are costs which have already been incurred and cannot be changed
Opportunity costs are value lost in alternative use
1	Cost of old machine	Sunk cost
2	Salary of head to radiology department	None
3	Salary of head of Pedlatrics Department	None
4	Cost of new laser color printer	Differential Cost
5	Rent of space occupied by radiology	None
6	Cost of maintaining old machine	Opportunity Cost
7	Benefits of new DNA analyser	Differential Cost
8	Cost of electricity to run X-ray machines	Opportunity Cost