Replace Equipment A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for $214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine June 2 Continue with Old Line Item Description Machine Replace Old Machine Differential Effects (Alternative 2) (Alternative 1) (Alternative 2) Proceeds from sale of old machine $ Revenues: Costs: Purchase price Direct labor (6 years) Profit (loss) A St St A B
Replace Equipment A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for $214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new machine would reduce annual direct labor costs from $50,400 to $40,300. a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue (Alt. 1) or Replace (Alt. 2) Old Machine June 2 Continue with Old Line Item Description Machine Replace Old Machine Differential Effects (Alternative 2) (Alternative 1) (Alternative 2) Proceeds from sale of old machine $ Revenues: Costs: Purchase price Direct labor (6 years) Profit (loss) A St St A B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Replace Equipment
A machine with a book value of $250,700 has an estimated remaining life of 6 years. A proposal is offered to sell the old machine for
$214,100 and replace it with a new machine at a cost of $283,500. The new machine has a 6-year life with no residual value. The new
machine would reduce annual direct labor costs from $50,400 to $40,300.
a. Prepare a differential analysis dated June 2 on whether to continue with the old machine (Alternative 1) or replace the old machine
(Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.
Differential Analysis
Continue (Alt. 1) or Replace (Alt. 2) Old Machine
June 2
Continue
with Old
Line Item Description
Machine
Replace
Old
Machine
Differential
Effects
(Alternative 2)
(Alternative 1) (Alternative 2)
Proceeds from sale of old machine $
Revenues:
Costs:
Purchase price
Direct labor (6 years)
Profit (loss)
A
St
St
A
B
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