Would this be correct? Differential Analysis for Machine Replacement ProposalFranklin 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 MachineCost of machine, 10-year life$106,000Annual depreciation (straight-line)10,600Annual manufacturing costs, excluding depreciation38,900Annual nonmanufacturing operating expenses11,400Annual revenue95,700Current estimated selling price of the machine35,000New MachineCost of machine, 6-year life$136,200Annual depreciation (straight-line)22,700Estimated annual manufacturing costs, exclusive of depreciation18,800Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.Required:1. Prepare a differential analysis as of November 8 to determine whether to Continue with Old Machine (Alternative 1) or Replace old Machine (Alternative 2). The analysis should indicate the differential profit that would result over the 6-year period if the new machine is acquired.If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.Differential AnalysisContinue with old Machine (Alt. 1) or Replace old Machine (Alt. 2)November 8ReplaceOld MachineContinue withDifferential Effectsold Machine(Alternative 2)(Alternative 1) (Alternative 2)RevenuesProceeds from sale of old machine35,00035,000CostsPurchase price-136,200-136,200Annual manufacturing costs (6 yrs.)-233,400-112,800120,600Profit (loss)$ -233,400-214,00019,4002. What other factors should be considered before a final decision is reached?a. Are there any improvements in the quality of work turned out by the new machine?b. What opportunities are available for the use of the funds required to purchase the new machine?c. 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?d. What affect would this decision have on employee morale?e. None of these choices is correct.

Yes , Correct In differential analysis , relevant cost is considered where cash inflow and outflow are considered. The purchase cost is a sunk cost and is not relevant in decision making. Depreciation is a non cash expense and is not considered in decision making. 1) Continue Replace Alternative 1 Alternative 2 Differential Effect Revenue $ 35,000 $ 35,000 Proceeds from the sale of old machine Cost Purchase Price $ -1,36,200 $ -1,36,200 Annual manufacturing Cost $ -2,33,400 $ -1,12,800 $ 1,20,600 Profit (loss) $ -2,33,400 $ -2,14,000 $ 19,400 2)Option C Are there any improvements in the quality of the work turned out by the new machine and what are opportunities are available for the use of the funds required to the purchase of the new machine