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The video tutorial focuses on incremental analysis for deciding whether to retain or replace equipment. It emphasizes comparing relevant costs affected by both alternatives, specifically variable manufacturing costs and the cost of new equipment. The book value of the existing machine is identified as a sunk cost, meaning it does not influence the decision-making process, as it cannot be altered by current or future actions. The book value is defined as the equipment's cost minus its accumulated depreciation. If the equipment is eliminated without receiving any trade-in value, the book value results in a loss on the income statement, affecting it similarly to depreciation.