Problem 24-2 (Algorithmic) Differential Analysis for Machine Replacement Proposa

Question

Problem 24-2 (Algorithmic)
Differential Analysis for Machine Replacement Proposal

Flint Tooling 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 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 February 29, 2012, comparing operations using the present equipment (Alternative 1) with operations using the new equipment (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. If an amount is zero, enter zero "0".

Old Machine Cost of machine, 10-year life $108,300 Annual depreciation (straight-line) 10,830 Annual manufacturing costs, excluding depreciation 38,400 Annual nonmanufacturing operating expenses 12,800 Annual revenue 95,000 Current estimated selling price of the machine 36,700 New Machine Cost of machine, six-year life $138,000 Annual depreciation (straight-line) 23,000 Estimated annual manufacturing costs, exclusive of depreciation 19,100

Explanation / Answer

Revenue 95000 95000

proceeds from sale 36700    0 0

Purchase                     108300    138000 29700

manufacturing cost    62030    54900    7130

income    32970      40100    7130

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.