Skiles Coporation is a manufacturer of classic rocking chairs. The company has been using a particular sanding and finishing machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a wise economic decision. The company's controller pulled together the following information on the old machine and the new possible replacement machine. Old Machine: Original cost Current accumulated depreciation Estimated annual variable manufacturing costs for machine Estimated selling price of machine Estimated remaining useful life (in years) New Machine: Purchase cost Estimated annual variable manufacturing costs for machine Estimated residual value Estimated useful life (in years) Select the relevant or irrelevant information below: Annual variable costs of old machine Selling price of old machine Matching lives Purchase price of new machine Accumulated depreciation of old machine Irrelevant Fill in the differential analysis. Cost of replacing old machine: Annual differential decrease in cost Relevant Relevant Relevant Relevant V Check My Work ✓ x number of years Total differential decrease in cost Proceeds from sale of present machine Cost of new machine Net differential (increase)/decrease in cost, six year total $455,900 313,100 71,350 Replace or Keep Decision Differential Analysis Report 188.200 6 $801,800 46,100 0 6 0000 Previous
Skiles Coporation is a manufacturer of classic rocking chairs. The company has been using a particular sanding and finishing machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a wise economic decision. The company's controller pulled together the following information on the old machine and the new possible replacement machine. Old Machine: Original cost Current accumulated depreciation Estimated annual variable manufacturing costs for machine Estimated selling price of machine Estimated remaining useful life (in years) New Machine: Purchase cost Estimated annual variable manufacturing costs for machine Estimated residual value Estimated useful life (in years) Select the relevant or irrelevant information below: Annual variable costs of old machine Selling price of old machine Matching lives Purchase price of new machine Accumulated depreciation of old machine Irrelevant Fill in the differential analysis. Cost of replacing old machine: Annual differential decrease in cost Relevant Relevant Relevant Relevant V Check My Work ✓ x number of years Total differential decrease in cost Proceeds from sale of present machine Cost of new machine Net differential (increase)/decrease in cost, six year total $455,900 313,100 71,350 Replace or Keep Decision Differential Analysis Report 188.200 6 $801,800 46,100 0 6 0000 Previous
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Skiles Coporation is a manufacturer of classic rocking chairs. The company has been using a particular sanding and finishing machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a
wise economic decision. The company's controller pulled together the following information on the old machine and the new possible replacement machine.
Old Machine:
Original cost
Current accumulated depreciation
Estimated annual variable manufacturing costs for machine
Estimated selling price of machine
Estimated remaining useful life (in years)
New Machine:
Purchase cost
Estimated annual variable manufacturing costs for machine
Estimated residual value
Estimated useful life (in years)
Select the relevant or irrelevant information below:
Relevant
Relevant
Matching lives
Relevant
Purchase price of new machine
Relevant
Accumulated depreciation of old machine Irrelevant
Annual variable costs of old machine
Selling price of old machine
Fill in the differential analysis.
Cost of replacing old machine:
Annual differential decrease in cost
x number of years
Total differential decrease in cost
Proceeds from sale of present machine
Cost of new machine
Net differential (increase)/decrease in cost, six year total
Check My Work
✓
✓
✓
✓
$455,900
313,100
71,350
Replace or Keep Decision
Differential Analysis Report
188,200
6
$801,800
46,100
0
6
Previous
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