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Obj. 1 PR 11-2A Differential analysis for machine replacement proposal Gutenberg Publishers Inc. is considering replacing a machine that has been used in its factory for 4 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: W Old Machine Cost of machine, 10-year life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of machine 2. New Machine Purchase price of machine, 6-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, excluding depreciation $120,000 12,000 30,000 22,500 90,000 40,000 $160,000 16,000 7,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. > Instructions 1. Prepare a differential analysis as of November 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential profit that would result over the 6-year period if the new machine is acquired. List other factors that should be considered before a final decision is reached.

Obj. 1 PR 11-2A Differential analysis for machine replacement proposal Gutenberg Publishers Inc. is considering replacing a machine that has been used in its factory for 4 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: W Old Machine Cost of machine, 10-year life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of machine 2. New Machine Purchase price of machine, 6-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, excluding depreciation $120,000 12,000 30,000 22,500 90,000 40,000 $160,000 16,000 7,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. > Instructions 1. Prepare a differential analysis as of November 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential profit that would result over the 6-year period if the new machine is acquired. List other factors that should be considered before a final decision is reached.

Financial & Managerial Accounting
Financial & Managerial Accounting
13th Edition
ISBN:9781285866307
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter9: Fixed Assets And Intangible Assets
Section: Chapter Questions
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PR 11-2A Differential analysis for machine replacement proposal Obj. 1 Gutenberg Publishers Inc. is considering replacing a machine that has been used in its factory for 4 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: W Old Machine Cost of machine, 10-year life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of machine 2. New Machine Purchase price of machine, 6-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, excluding depreciation $120.000 12,000 30,000 22,500 90,000 40,000 $160,000 16,000 7,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Instructions 1. Prepare a differential analysis as of November 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential profit that would result over the 6-year period if the new machine is acquired. List other factors that should be considered before a final decision is reached.
Transcribed Image Text:PR 11-2A Differential analysis for machine replacement proposal Obj. 1 Gutenberg Publishers Inc. is considering replacing a machine that has been used in its factory for 4 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: W Old Machine Cost of machine, 10-year life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of machine 2. New Machine Purchase price of machine, 6-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, excluding depreciation $120.000 12,000 30,000 22,500 90,000 40,000 $160,000 16,000 7,500 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Instructions 1. Prepare a differential analysis as of November 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential profit that would result over the 6-year period if the new machine is acquired. List other factors that should be considered before a final decision is reached.
2 Cost of machine, ten-year life 3 Annual depreciation (straight-line) 4 Annual manufacturing costs, excluding depreciation 5 Annual nonmanufacturing operating expenses 6 Annual revenue 7 Current estimated selling price of the machine 8 Remaining useful life 9 10 11 Purchase price of machine, six-year life 12 Annual depreciation (straight-line) 13 Estimated annual manufacturing costs, exclusive of depreciation 14 Useful life 15 1618 16-1 17 18 19 852372 S53SS383 20 21 Revenues: 23 Costs: 24 26 28 27 Income (loss) 29 30 2 New Machine 31 Proceeds from sale of old machine Purchase price of new machine Manufacturing costs Total costs PR 9-2A Template S Ⓒ $ 120,000 12,000 30,000 4 Differential Analysis Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2) 8-Nov 22,500 90,000 40,000 $ 160,000 16,000 7,500 Continue with Old Machine (Alternative 1) years years Replace Old Machine (Alternative 2) $ $ S $ Differential Effect on Income (Alternative 2) 40.000 $ [160,000) (160.000) $ (120,000) $ 40,000 (160,000) (160,000) (120.000
Transcribed Image Text:2 Cost of machine, ten-year life 3 Annual depreciation (straight-line) 4 Annual manufacturing costs, excluding depreciation 5 Annual nonmanufacturing operating expenses 6 Annual revenue 7 Current estimated selling price of the machine 8 Remaining useful life 9 10 11 Purchase price of machine, six-year life 12 Annual depreciation (straight-line) 13 Estimated annual manufacturing costs, exclusive of depreciation 14 Useful life 15 1618 16-1 17 18 19 852372 S53SS383 20 21 Revenues: 23 Costs: 24 26 28 27 Income (loss) 29 30 2 New Machine 31 Proceeds from sale of old machine Purchase price of new machine Manufacturing costs Total costs PR 9-2A Template S Ⓒ $ 120,000 12,000 30,000 4 Differential Analysis Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2) 8-Nov 22,500 90,000 40,000 $ 160,000 16,000 7,500 Continue with Old Machine (Alternative 1) years years Replace Old Machine (Alternative 2) $ $ S $ Differential Effect on Income (Alternative 2) 40.000 $ [160,000) (160.000) $ (120,000) $ 40,000 (160,000) (160,000) (120.000
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