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 $57,900, the accumulated depreciation is $23,200, 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 $109,000. 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: Current Operations Proposed Operations Sales $183,500 $183,500 Direct materials $62,500 $62,500 Direct labor 43,400 14,500 Power and maintenance 4,100 6,900 Taxes, insurance, etc. 1,400 4,800 Selling and administrative expenses 43,400 43,400 Total expenses $154,800 $132,100 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 MachineDifferential Analysis Report Annual costs and expenses—present machine $fill in the blank 7fc929fa5052fe2_1 Annual costs and expenses—new machine fill in the blank 7fc929fa5052fe2_2 $Annual differential decrease in costs and expenses Number of years applicable × fill in the blank 7fc929fa5052fe2_5 $Total differential decrease in costs and expenses Cost of new machine fill in the blank 7fc929fa5052fe2_8 $Net differential decrease in costs and expenses, five-year total Annual net differential decrease in costs and expenses—new machine $fill in the blank 7fc929fa5052fe2_11

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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 $57,900, the accumulated depreciation is $23,200, 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 $109,000. 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:

	Current Operations	Proposed Operations
Sales	$183,500		$183,500
Direct materials	$62,500		$62,500
Direct labor	43,400		14,500
Power and maintenance	4,100		6,900
Taxes, insurance, etc.	1,400		4,800
Selling and administrative expenses	43,400		43,400
Total expenses	$154,800		$132,100

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 MachineDifferential Analysis Report

Annual costs and expenses—present machine	$fill in the blank 7fc929fa5052fe2_1
Annual costs and expenses—new machine	fill in the blank 7fc929fa5052fe2_2
	$Annual differential decrease in costs and expenses
Number of years applicable	× fill in the blank 7fc929fa5052fe2_5
	$Total differential decrease in costs and expenses
Cost of new machine	fill in the blank 7fc929fa5052fe2_8
	$Net differential decrease in costs and expenses, five-year total
Annual net differential decrease in costs and expenses—new machine	$fill in the blank 7fc929fa5052fe2_11

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