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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: Old Machine Cost of machine, ten-year life $108,800 Annual depreciation (straight-line) 10,880 Annual manufacturing costs, excluding depreciation 39,000 Annual nonmanufacturing operating expenses 13,300 Annual revenue 94,200 Current estimated selling price of the machine 35,900 New Machine Cost of machine, six-year life $137,400 Annual depreciation (straight-line) 22,900 Estimated annual manufacturing costs, exclusive of depreciation 17,300 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 November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Continue with Replace Old Machine Differential Old Machine Effects

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: Old Machine Cost of machine, ten-year life $108,800 Annual depreciation (straight-line) 10,880 Annual manufacturing costs, excluding depreciation 39,000 Annual nonmanufacturing operating expenses 13,300 Annual revenue 94,200 Current estimated selling price of the machine 35,900 New Machine Cost of machine, six-year life $137,400 Annual depreciation (straight-line) 22,900 Estimated annual manufacturing costs, exclusive of depreciation 17,300 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 November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Continue with Replace Old Machine Differential Old Machine Effects

Managerial Accounting
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 2PB: Differential analysis for machine replacement proposal Flint Tooling Company is considering...
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Required: 1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Continue with Replace Differential Old Machine Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Proceeds from sale of old machine Costs Purchase price Annual manufacturing costs (6 yrs.) Profit (loss) 2. What other factors should be considered before a final decision is reached? a. Are there any improvements in the quality of work turned out by the new machine? b. What opportunities are available for the use of the funds required to purchase the new machine? c. Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine? d. What affect would this decision have on employee morale? e. None of these choices are correct.
Transcribed Image Text:Required: 1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Continue with Replace Differential Old Machine Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2) Revenues Proceeds from sale of old machine Costs Purchase price Annual manufacturing costs (6 yrs.) Profit (loss) 2. What other factors should be considered before a final decision is reached? a. Are there any improvements in the quality of work turned out by the new machine? b. What opportunities are available for the use of the funds required to purchase the new machine? c. Are there any improvements in the quality of work turned out by the new machine and what opportunities are available for the use of the funds required to purchase the new machine? d. What affect would this decision have on employee morale? e. None of these choices are correct.
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: Old Machine Cost of machine, ten-year life $108,800 Annual depreciation (straight-line) 10,880 Annual manufacturing costs, excluding depreciation 39,000 Annual nonmanufacturing operating expenses 13,300 Annual revenue 94,200 Current estimated selling price of the machine 35,900 New Machine Cost of machine, six-year life $137,400 Annual depreciation (straight-line) 22,900 Estimated annual manufacturing costs, exclusive of depreciation 17,300 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 November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Replace Old Machine Continue with Differential Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2)
Transcribed Image Text: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: Old Machine Cost of machine, ten-year life $108,800 Annual depreciation (straight-line) 10,880 Annual manufacturing costs, excluding depreciation 39,000 Annual nonmanufacturing operating expenses 13,300 Annual revenue 94,200 Current estimated selling price of the machine 35,900 New Machine Cost of machine, six-year life $137,400 Annual depreciation (straight-line) 22,900 Estimated annual manufacturing costs, exclusive of depreciation 17,300 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 November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8 Replace Old Machine Continue with Differential Old Machine Effects (Alternative 1) (Alternative 2) (Alternative 2)
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