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 $107,800 Annual depreciation (straight-line) 10,780 Annual manufacturing costs, excluding depreciation 39,600 Annual nonmanufacturing operating expenses 12,400 Annual revenue 95,300 Current estimated selling price of the machine 35,200 New Machine Cost of machine, 6-year life $137,400 Annual depreciation (straight-line) 22,900 Estimated annual manufacturing costs, exclusive of depreciation 18,500 Annual 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 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). The analysis should indicate the differential profit that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)November 8 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues Proceeds from sale of old machine $fill in the blank 1ed60a050075f9c_1 $fill in the blank 1ed60a050075f9c_2 $fill in the blank 1ed60a050075f9c_3 Costs Purchase price fill in the blank 1ed60a050075f9c_4 fill in the blank 1ed60a050075f9c_5 fill in the blank 1ed60a050075f9c_6 Annual manufacturing costs (6 yrs.) fill in the blank 1ed60a050075f9c_7 fill in the blank 1ed60a050075f9c_8 fill in the blank 1ed60a050075f9c_9 Profit (loss) $fill in the blank 1ed60a050075f9c_10 $fill in the blank 1ed60a050075f9c_11 $fill in the blank 1ed60a050075f9c_12 2. What other factors should be considered before a final decision is reached? Are there any improvements in the quality of work turned out by the new machine? What opportunities are available for the use of the funds required to purchase the new machine? 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? What affect would this decision have on employee morale? None of these choices is correct.

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 $107,800 Annual depreciation (straight-line) 10,780 Annual manufacturing costs, excluding depreciation 39,600 Annual nonmanufacturing operating expenses 12,400 Annual revenue 95,300 Current estimated selling price of the machine 35,200 New Machine Cost of machine, 6-year life $137,400 Annual depreciation (straight-line) 22,900 Estimated annual manufacturing costs, exclusive of depreciation 18,500 Annual 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 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). The analysis should indicate the differential profit that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)November 8 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues Proceeds from sale of old machine $fill in the blank 1ed60a050075f9c_1 $fill in the blank 1ed60a050075f9c_2 $fill in the blank 1ed60a050075f9c_3 Costs Purchase price fill in the blank 1ed60a050075f9c_4 fill in the blank 1ed60a050075f9c_5 fill in the blank 1ed60a050075f9c_6 Annual manufacturing costs (6 yrs.) fill in the blank 1ed60a050075f9c_7 fill in the blank 1ed60a050075f9c_8 fill in the blank 1ed60a050075f9c_9 Profit (loss) $fill in the blank 1ed60a050075f9c_10 $fill in the blank 1ed60a050075f9c_11 $fill in the blank 1ed60a050075f9c_12 2. What other factors should be considered before a final decision is reached? Are there any improvements in the quality of work turned out by the new machine? What opportunities are available for the use of the funds required to purchase the new machine? 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? What affect would this decision have on employee morale? None of these choices is correct.

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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Question

Old Machine
Cost of machine, 10-year life	$107,800
Annual depreciation (straight-line)	10,780
Annual manufacturing costs, excluding depreciation	39,600
Annual nonmanufacturing operating expenses	12,400
Annual revenue	95,300
Current estimated selling price of the machine	35,200

New Machine
Cost of machine, 6-year life	$137,400
Annual depreciation (straight-line)	22,900
Estimated annual manufacturing costs, exclusive of depreciation	18,500

Annual 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 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). The analysis should indicate the differential profit that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)November 8

	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues
Proceeds from sale of old machine	$fill in the blank 1ed60a050075f9c_1	$fill in the blank 1ed60a050075f9c_2	$fill in the blank 1ed60a050075f9c_3
Costs
Purchase price	fill in the blank 1ed60a050075f9c_4	fill in the blank 1ed60a050075f9c_5	fill in the blank 1ed60a050075f9c_6
Annual manufacturing costs (6 yrs.)	fill in the blank 1ed60a050075f9c_7	fill in the blank 1ed60a050075f9c_8	fill in the blank 1ed60a050075f9c_9
Profit (loss)	$fill in the blank 1ed60a050075f9c_10	$fill in the blank 1ed60a050075f9c_11	$fill in the blank 1ed60a050075f9c_12

2. What other factors should be considered before a final decision is reached?

Are there any improvements in the quality of work turned out by the new machine?
What opportunities are available for the use of the funds required to purchase the new machine?
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?
What affect would this decision have on employee morale?
None of these choices is correct.

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