## Flint Tooling Company Machine Replacement Analysis### BackgroundFlint Tooling Company is considering replacing a machine used in its factory for two years. The new and old machines have no estimated residual value. Below is the relevant data for both machines:### Old Machine- **Cost of machine, eight-year life:** $40,000- **Annual depreciation (straight line):** $5,000- **Annual manufacturing costs, excluding depreciation:** $12,400- **Annual nonmanufacturing operating expenses:** $2,900- **Annual revenue:** $35,400- **Current estimated selling price of the machine:** $13,900### New Machine- **Cost of machine, six-year life:** $59,000- **Annual depreciation (straight line):** $9,500- **Estimated annual manufacturing cost, less depreciation:** $3,900*Note: Annual nonmanufacturing operating expenses and revenue are not expected to change with the purchase of the new machine.*### Question 2 Instructionsa. **Differential Analysis:** - Prepare a differential analysis comparing operations as of November 8. Compare the present machine (Alternative 1) with operations using the new machine (Alternative 2). - The analysis should determine the differential income over the six-year period if the new machine is acquired.b. **Considerations:** - List other factors to be considered before making the final decision.

Differential Analysis is done when a company has to decide between two or more course of actions.…

2. Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight year life Annual depreciation (straight line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of the machine New Machine Cost of machines, six year life Annual depreciation (straight line) Estimated annual manufacturing cost, less depreciation $40,000 5,000 12,400 2,900 35,400 13,900 $59,000 9,500 3,900 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. estion 2 Instructions a. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. b. List other factors that should be considered before a final decision is reached.

2. Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight year life Annual depreciation (straight line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of the machine New Machine Cost of machines, six year life Annual depreciation (straight line) Estimated annual manufacturing cost, less depreciation $40,000 5,000 12,400 2,900 35,400 13,900 $59,000 9,500 3,900 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. estion 2 Instructions a. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. b. List other factors that should be considered before a final decision is reached.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight year life $40,000 Annual depreciation (straight line) 5,000 Annual manufacturing costs, excluding depreciation 12,400 Annual nonmanufacturing operating expenses 2,900 Annual revenue 35,400 Current estimated selling price of the machine 13,900 New Machine Cost of machines, six year life $59,000 Annual depreciation (straight line) 9,500 Estimated annual manufacturing cost, less depreciation 3,900 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1)…
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