Differential Analysis Report for Machine Replacement Proposal (PLEASE SEE QUESTION OVERVIEW IN ATTACHMENT) Franklin Printing 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 re
Differential Analysis Report for Machine Replacement Proposal
(PLEASE SEE QUESTION OVERVIEW IN ATTACHMENT)
Franklin Printing 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:
| Old Machine | |
| Cost of machine, 10-year life | $107,800 |
| Annual depreciation (straight-line) | 10,780 |
| Annual |
37,600 |
| Annual nonmanufacturing operating expenses | 12,500 |
| Annual revenue | 95,100 |
| Current estimated selling price of the machine | 35,700 |
| New Machine | |
| Cost of machine, six-year life | $138,000 |
| Annual depreciation (straight-line) | 23,000 |
| Estimated annual manufacturing costs, exclusive of depreciation | 19,000 |
| Annual nonmanufacturing operation expenses | 10,000 |
Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine
Required:
1. Prepare a differential analysis report comparing operations utilizing the new machine with operations using the old machine. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. Enter all amounts as positive numbers.
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