Exercise 2

EXERCISE 2-7 DIFFERENTAIL, OPPORTUNITY ,AND SUNK 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 Xray machine.The new machine would provide higher quality X-rayin 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 inversting the funds in the new X-ray machine,the Laboratory Department is lobbying the Hospital’s management to buy a new DNA analyzer. Required

For each of the items below,indicate by placing an X in the appropriate column whether it should be considered a differential cost,an opportuniy cost, or a sunk cost in the dicision to replace the old X-ray machine with a new machine.If none of the categories apply for a particular item, leave all column blank. ITEM of X-ray film used in the old machine.

DIFFERENTAIL ITEM

OPPORTUNITY COST

Ex:Cost

1)Cost of the old Xray machine

X

X

2)The salary of the head of the Radiology Department

X

3)The salary of the head of the Pediatrics Department.

X

4)Cost of the new color laser printer

X

5)Rent on the space occupied by Radiology.

X

6)The cost of maintaining the old machine.

X

SUNK COST

7)Benefit from a new DNA analyzer. 8)Cost of eletricity to run the X-ray machine.

X

X