Old Machine Cost of machine, 10-year life $89,000 Annual depreciation (straight-line) 8,900 Annual manufacturing costs, exeluding depreciation 23,600 Annual nonmanufacturing operating expenses 6,100 Annual revenue 74,200 Gurrent estimated selling price of machine 29,700 New Machine Purchase price of machine, six-year life $119,700 Annual depreciation (straight-line) 19,950 Estimated annual manufacturing costs, excluding 6,900 depreciation
Differntial analysis for machine replacement proposal
Lexigraphic 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:
Annual nonmanfacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.
Instructions
1. Prepare a differential analysis as of april 30 comparing operations using the present machine (alternative 1 ) with operations using the new machine (alternative 2 ).The analysis should indicate the total differntial income that would result over the six-years period if the new machine is acquired.
2 List other factors that should be considered before a final decision is reached.
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