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Differential Analysis Report for Machine Replacement White Noise Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $71,700, the accumulated depreciation is $28,700, its remaining useful lit years, and its residual value is zero. A proposal was made to replace the present manufacturing procedure with a fully automatic machine that will cost $134,900. The automatic machine has an estimated useful life of five years and no s residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on current and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses Current Proposed Operations Operations $227,300 $227,300 $77,400 53,800 5,000 1,800 Number of years applicable Annual costs and expenses-present machine Annual costs and expenses-new machine Cost of new machine 53,800 $191,800 $77,400 a. Prepare a differential analysis report for the proposal to replace the machine. Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated. WHITE NOISE TECHNOLOGIES INC. Replace Machine Differential Analysis Report 17,900 8,600 6,000 53,800 $163,700 Annual pot differential decrease in corts and expenses pox machine Globobobo

Differential Analysis Report for Machine Replacement White Noise Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $71,700, the accumulated depreciation is $28,700, its remaining useful lit years, and its residual value is zero. A proposal was made to replace the present manufacturing procedure with a fully automatic machine that will cost $134,900. The automatic machine has an estimated useful life of five years and no s residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on current and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses Current Proposed Operations Operations $227,300 $227,300 $77,400 53,800 5,000 1,800 Number of years applicable Annual costs and expenses-present machine Annual costs and expenses-new machine Cost of new machine 53,800 $191,800 $77,400 a. Prepare a differential analysis report for the proposal to replace the machine. Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated. WHITE NOISE TECHNOLOGIES INC. Replace Machine Differential Analysis Report 17,900 8,600 6,000 53,800 $163,700 Annual pot differential decrease in corts and expenses pox machine Globobobo

FINANCIAL ACCOUNTING
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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Differential Analysis Report for Machine Replacement White Noise Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $71,700, the accumulated depreciation is $28,700, its remaining useful life is five years, and its residual value is zero. A proposal was made to replace the present manufacturing procedure with a fully automatic machine that will cost $134,900. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on current and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses Current Proposed Operations Operations $227,300 $227,300 Number of years applicable Annual costs and expenses-present machine Annual costs and expenses-new machine Cost of new machine $77,400 53,800 5,000 1,800 53,800 $191,800 a. Prepare a differential analysis report for the proposal to replace the machine. Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated. WHITE NOISE TECHNOLOGIES INC. Replace Machine Differential Analysis Report $77,400 17,900 8,600 6,000 53,800 $163,700 Annual net differential decrease in costs and expenses-new machine 00000000
Transcribed Image Text:Differential Analysis Report for Machine Replacement White Noise Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $71,700, the accumulated depreciation is $28,700, its remaining useful life is five years, and its residual value is zero. A proposal was made to replace the present manufacturing procedure with a fully automatic machine that will cost $134,900. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on current and proposed operations: Sales Direct materials Direct labor Power and maintenance Taxes, insurance, etc. Selling and administrative expenses Total expenses Current Proposed Operations Operations $227,300 $227,300 Number of years applicable Annual costs and expenses-present machine Annual costs and expenses-new machine Cost of new machine $77,400 53,800 5,000 1,800 53,800 $191,800 a. Prepare a differential analysis report for the proposal to replace the machine. Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated. WHITE NOISE TECHNOLOGIES INC. Replace Machine Differential Analysis Report $77,400 17,900 8,600 6,000 53,800 $163,700 Annual net differential decrease in costs and expenses-new machine 00000000
Annual net differential decrease in costs and expenses-new machine b. Based only on the data presented, should the proposal be accepted? c. What are some of the other factors that should be considered before a final decision is made? 1. Do present and proposed operations provide the same capacity? 2. What are the opportunity costs associated with alternative uses of the $134,900 outlay required to purchase the automatic machine? 3. Is the product improved by using automatic machinery? 4. What is the book value of the manually operated machine that will be replaced? Select the relevant factor(s) from the list above.
Transcribed Image Text:Annual net differential decrease in costs and expenses-new machine b. Based only on the data presented, should the proposal be accepted? c. What are some of the other factors that should be considered before a final decision is made? 1. Do present and proposed operations provide the same capacity? 2. What are the opportunity costs associated with alternative uses of the $134,900 outlay required to purchase the automatic machine? 3. Is the product improved by using automatic machinery? 4. What is the book value of the manually operated machine that will be replaced? Select the relevant factor(s) from the list above.
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