A machine with a book value of $86,000 has an estimated five-year life. A proposal is offered to sell the old machine for $40,500 and replace it with a new machine at a cost of $67,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $10,300 to $9,700. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs, losses, or negative differential effect on income.
Replace equipment
A machine with a book value of $86,000 has an estimated five-year life. A proposal is offered to sell the old machine for $40,500 and replace it with a new machine at a cost of $67,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $10,300 to $9,700.
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". Use a minus sign to indicate costs, losses, or negative differential effect on income.
![Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
April 11
Continue with Old
Replace Old
Differential Effects
Machine
Machine
(Alternative 2)
(Alternative 1)
(Alternative 2)
Revenues:
Proceeds from sale of old machine
Costs:
Purchase price
Direct labor (5 years)
Profit (Loss)
Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?
Continue with the old machine v
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