Question

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 and 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.
For each of the items below, indicate whether it should be considered a differential cost (DC), an opportunity cost (OC) or a sunk cost (SC) in the decision to replace the old X-ray machine with a new machine. If none of the categories apply for a particular item, please put (NA) next to the number for "none apply". Please list the number and the 2 digit abbreviation next to it. For example, 1.OC, 2. SC, etc.

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 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

Answer:

1. Cost of the old X-ray machine - SC

2. The salary of the head of the Radiology Department - None

3. The salary of the head of the Pediatrics Department - None

4. Cost of the new laser printer - DC

5. Rent on the space occupied by Radiology - None

6. The cost of maintaining the old machine - DC

7. Benefits from a new DNA analyzer - OC

8. Cost of electricity to run the X-ray machines - DC

Where,

SC - Sunk cost

DC - Differential cost

OC - Opportunity cost