Differential Analysis Report for Machine Replacement Proposal (PLEASE SEE ORIGINAL QUESTION OVERVIEW IN ATTACHMENT) Franklin Printing Company is considering replacing a machine that has been used in its factory for four 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 $107,800 Annual depreciation (straight-line) 10,780 Annual manufacturing costs, excluding depreciation 37,600 Annual nonmanufacturing operating expenses 12,500 Annual revenue 95,100 Current estimated selling price of the machine 35,700 New Machine Cost of machine, six-year life $138,000 Annual depreciation (straight-line) 23,000 Estimated annual manufacturing costs, exclusive of depreciation 19,000 Annual nonmanufacturing operation expenses 10,000 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine Required: 1. Prepare a differential analysis report comparing operations utilizing the new machine with operations using the old machine. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. Enter all amounts as positive numbers. Franklin Printing Company Proposal to Replace Machine Option a $___________ Option b _____________ Option c $ ___________ Number of years applicable x _____________ Option d $_____________ Option e _________________ Option f $______________ Option f ______________ Option g $______________ What are some of the other factors that should be considered before a final decision is made? ______________ Are there any improvements in the quality of work turned out by the new machine? What other opportunities are available for the use of the funds that are required to purchase the new machine? What effect does the federal income tax have on the decision? What is the book value of the machine that will be replaced? Options a. 1 only b. 1, 2 and 3 only c. 2 and 3 only d. 3 and 4 only e. 1, 2, 3 and 4

Differential Analysis Report for Machine Replacement Proposal (PLEASE SEE ORIGINAL QUESTION OVERVIEW IN ATTACHMENT) Franklin Printing Company is considering replacing a machine that has been used in its factory for four 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 $107,800 Annual depreciation (straight-line) 10,780 Annual manufacturing costs, excluding depreciation 37,600 Annual nonmanufacturing operating expenses 12,500 Annual revenue 95,100 Current estimated selling price of the machine 35,700 New Machine Cost of machine, six-year life $138,000 Annual depreciation (straight-line) 23,000 Estimated annual manufacturing costs, exclusive of depreciation 19,000 Annual nonmanufacturing operation expenses 10,000 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine Required: 1. Prepare a differential analysis report comparing operations utilizing the new machine with operations using the old machine. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. Enter all amounts as positive numbers. Franklin Printing Company Proposal to Replace Machine Option a $_____ Option b _ Option c $ _ Number of years applicable x ___ Option d $_ Option e _ Option f $ Option f Option g $ What are some of the other factors that should be considered before a final decision is made? ______ Are there any improvements in the quality of work turned out by the new machine? What other opportunities are available for the use of the funds that are required to purchase the new machine? What effect does the federal income tax have on the decision? What is the book value of the machine that will be replaced? Options a. 1 only b. 1, 2 and 3 only c. 2 and 3 only d. 3 and 4 only e. 1, 2, 3 and 4

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 Proposal

(PLEASE SEE ORIGINAL QUESTION OVERVIEW IN ATTACHMENT)

Franklin Printing Company is considering replacing a machine that has been used in its factory for four 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	$107,800
Annual depreciation (straight-line)	10,780
Annual manufacturing costs, excluding depreciation	37,600
Annual nonmanufacturing operating expenses	12,500
Annual revenue	95,100
Current estimated selling price of the machine	35,700

New Machine
Cost of machine, six-year life	$138,000
Annual depreciation (straight-line)	23,000
Estimated annual manufacturing costs, exclusive of depreciation	19,000
Annual nonmanufacturing operation expenses	10,000

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine

Required:

1. Prepare a differential analysis report comparing operations utilizing the new machine with operations using the old machine. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. Enter all amounts as positive numbers.

Franklin Printing Company
Proposal to Replace Machine

Option a	$___________
Option b	_____________
Option c	$ ___________
Number of years applicable	x _____________
Option d	$_____________
Option e	_________________
Option f	$______________
Option f	______________
Option g	$______________

What are some of the other factors that should be considered before a final decision is made? ______________

Are there any improvements in the quality of work turned out by the new machine?
What other opportunities are available for the use of the funds that are required to purchase the new machine?
What effect does the federal income tax have on the decision?
What is the book value of the machine that will be replaced?

Options

a. 1 only

b. 1, 2 and 3 only

c. 2 and 3 only

d. 3 and 4 only

e. 1, 2, 3 and 4

Differential Analysis Report for Machine Replacement Proposal
Franklin Printing Company is considering replacing a machine that has been used in its factory for four 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
$107,800
Annual depreciation (straight-line)
10,780
Annual manufacturing costs, excluding depreciation
37,600
Annual nonmanufacturing operating expenses
12,500
Annual revenue
95,100
Current estimated selling price of the machine
35,700
New Machine
Cost of machine, six-year life
$138,000
Annual depreciation (straight-line)
23,000
Estimated annual manufacturing costs, exclusive of depreciation
19,000
Annual nonmanufacturing operation expenses
10,000
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Required:
1. Prepare a differential analysis report comparing operations utilizing the new machine with operations using the old machine. The analysis should indicate the differential income that would result over the six-year period if the new machine is
acquired. Enter all amounts as positive numbers.
Franklin Printing Company
Proposal
Replace Machine
Proceeds from sale of present machine
$ -35,700
Number of years applicable

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