Differential Analysis for Machine Replacement ProposalFranklin Printing Company is considering replacing a machine that has been used in its factory for 4 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 MachineCost of machine, 10-year lifeAnnual depreciation (straight-line)Annual manufacturing costs, excluding depreciationAnnual nonmanufacturing operating expensesAnnual revenueCurrent estimated selling price of the machineNew Machine$109,30010,93038,00011,30095,80036,600Cost of machine, 6-year lifeAnnual depreciation (straight-line)$135,60022,60017,500Estimated annual manufacturing costs, exclusive of depreciationAnnual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.Required: 1. 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 profit that would result over the 6-year period if the new machineis acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)November 8CostsLine Item DescriptionRevenuesProceeds from sale of old machinePurchase priceAnnual manufacturing costs (6 yrs.)Profit (loss)Continue with OldMachine (Alternative 1)Replace Old Machine Differential Effects(Alternative 2)(Alternative 2)2. What other factors should be considered before a final decision is reached?a. Are there any improvements in the quality of work turned out by the new machine?b. What opportunities are available for the use of the funds required to purchase the new machine?c. Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine?d. What affect would this decision have on employee morale?e. None of these choices are correct.

Differential Analysis for Machine Replacement Proposal Franklin Printing Company is considering replacing a machine that has been used in its factory for 4 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, 10-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 $109,300 10,930 38,000 11,300 95,800 36,600 Cost of machine, 6-year life $135,600 22,600 Annual depreciation (straight-line). Estimated annual manufacturing costs, exclusive of depreciation 17,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.. Required:

Differential Analysis for Machine Replacement Proposal Franklin Printing Company is considering replacing a machine that has been used in its factory for 4 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, 10-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 $109,300 10,930 38,000 11,300 95,800 36,600 Cost of machine, 6-year life $135,600 22,600 Annual depreciation (straight-line). Estimated annual manufacturing costs, exclusive of depreciation 17,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.. Required:

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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