offered to sell the old machine for $50,500 and replace it with a new machine at a cost of $75,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $11,200 to $7,400.a. 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". If required, use a minus sign to indicate a loss.Differential AnalysisContinue Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)April 11 Continuewith OldMachine(Alternative 1)ReplaceOldMachine(Alternative 2)DifferentialEffects(Alternative 2)Revenues: Proceeds from sale of old machine$$$Costs: Purchase price Direct labor (5 years) Profit (Loss)$$ (Can you please explaine how you got this number)$ b. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?

Answer a) Differential Analysis Continue Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)…

Answered: offered to sell the old machine for…

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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offered to sell the old machine for $50,500 and replace it with a new machine at a cost of $75,000. The new machine has a five-year life with no residual value. The new machine would reduce annual direct labor costs from $11,200 to $7,400.

a. 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". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
April 11
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Proceeds from sale of old machine	$	$	$
Costs:
Purchase price
Direct labor (5 years)
Profit (Loss)	$	$ (Can you please explaine how you got this number)	$

b. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?

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