a. Prepare a differential analysis dated October 1 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Revenues Line Item Description Sales (5 years) Costs: Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine October 1 Continue with Old Machine (Alternative 1) Purchase price Direct materis (5 years) Direct labor (5 years) Power and maintenance (5 years) 000000 Replace Old Machine (Alternative 2) 000000 Differential Effects (Alternative 2)
a. Prepare a differential analysis dated October 1 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Revenues Line Item Description Sales (5 years) Costs: Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine October 1 Continue with Old Machine (Alternative 1) Purchase price Direct materis (5 years) Direct labor (5 years) Power and maintenance (5 years) 000000 Replace Old Machine (Alternative 2) 000000 Differential Effects (Alternative 2)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Subject: acounting
Transcribed Image Text:a. Prepare a differential analysis dated October 1 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. Prepare the analysis
over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Revenues:
Line Item Description
Sales (5 years)
Costs:
Differential Analysis
Continue with (Alt. 1) or Replace (Alt. 2) Old Machine
October 1
Purchase price
Direct materis (5 years)
Direct labor (5 years)
Power and maintenance (5 years)
Taxes, insurance, etc. (5 years)
Selling and admin. expenses (5 years)
Profit (loss)
Continue with
Old Machine
(Alternative 1)
Q▬▬▬▬
Replace Old Machine Differential Effects
(Alternative 2)
(Alternative 2)
Q☐☐☐☐☐
▬▬▬▬▬▬
Transcribed Image Text:Differential Analysis for Machine Replacement
Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to Insert electronic components. The original cost of the machine
is $69,200, the accumulated depreciation is $27,700, its remaining useful life is 5 years, and its residual value is negligible. On October 1 of the current year, a proposal
was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $143,900. The automatic machine has an
estimated useful life of 5 years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on
present and proposed operations:
Sales
Direct materials
Direct labor
Power and maintenance
Taxes, insurance, etc.
Selling and administrative expenses
Total expenses
Present Proposed
Operations Operations
$219,400
$219,400
$74,700
$74,700
51,900
4,800
1,700
51,900
25,600
5,700
51,900
$185,000 $157,900
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