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 MachineCost of machine, 10-year life$106,700Annual depreciation (straight-line)10,670Annual manufacturing costs, excluding depreciation38,100Annual nonmanufacturing operating expenses13,100Annual revenue95,300Current estimated selling price of the machine35,000 New MachineCost of machine, six-year life$136,200Annual depreciation (straight-line)22,700Annual manufacturing costs, excluding depreciation18,400Annual nonmanufacturing operating expenses10,000Annual nonmanufacturing operating expenses and revenue are not expected to be affected by the 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.

Note 1: As Revenue and Non manufacturing will not be affected , the same are not considered. Note 2:…

Answered: Franklin Printing Company is…

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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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	$106,700
Annual depreciation (straight-line)	10,670
Annual manufacturing costs, excluding depreciation	38,100
Annual nonmanufacturing operating expenses	13,100
Annual revenue	95,300
Current estimated selling price of the machine	35,000

New Machine
Cost of machine, six-year life	$136,200
Annual depreciation (straight-line)	22,700
Annual manufacturing costs, excluding depreciation	18,400
Annual nonmanufacturing operating expenses	10,000

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by the 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.

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