Final answer:
When deciding whether to continue using a current machine or buy a new one, one should consider relevant costs, which include variable and potential future costs, but ignore sunk costs, as they are past expenditures that cannot be recovered.
Step-by-step explanation:
When making a decision to continue using a current machine versus purchasing a new machine, it is important to consider relevant costs. Relevant costs are those that will be directly affected by the decision and can include both existing and potential future costs. Sunk costs, on the other hand, are costs that have already been incurred in the past and cannot be recovered; these should be ignored in the analysis as they do not change regardless of future decisions. Variable costs are also relevant as they can change based on the decision and provide information about the firm's ability to cut costs presently.