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 Line Item Description June 2 Continue with Old Machine Replace Old Differential Machine Effects (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine 0.00 $ 214,100 214,100 Costs: Purchase price Direct labor (6 years) Profit (loss) $ 0.00 -283,500 -283,500 302,400 241,800 60,600 -302,400 St 0 X 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 Line Item Description June 2 Continue with Old Machine Replace Old Differential Machine Effects (Alternative 2) (Alternative 1) (Alternative 2) Revenues: Proceeds from sale of old machine 0.00 $ 214,100 214,100 Costs: Purchase price Direct labor (6 years) Profit (loss) $ 0.00 -283,500 -283,500 302,400 241,800 60,600 -302,400 St 0 X B
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 4BE: Replace equipment A machine with a book value of 80,000 has an estimated five-year life. A proposal...
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