oyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $63,700, the accumulated depreciation is $25,500, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $132,500. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $201,900 $201,900 Direct materials $68,800 $68,800 Direct labor 47,800 — Power and maintenance 4,500 23,600 Taxes, insurance, etc. 1,600 5,300 Selling and administrative expenses 47,800 47,800 Total expenses $170,500 $145,500 Question Content Area a. Prepare a differential analysis dated May 4 to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)May 4 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues: Sales (5 years) $fill in the blank 4e84df06203c073_1 $fill in the blank 4e84df06203c073_2 $fill in the blank 4e84df06203c073_3 Costs: Purchase price fill in the blank 4e84df06203c073_4 fill in the blank 4e84df06203c073_5 fill in the blank 4e84df06203c073_6 Direct materials (5 years) fill in the blank 4e84df06203c073_7 fill in the blank 4e84df06203c073_8 fill in the blank 4e84df06203c073_9 Direct labor (5 years) fill in the blank 4e84df06203c073_10 fill in the blank 4e84df06203c073_11 fill in the blank 4e84df06203c073_12 Power and maintenance (5 years) fill in the blank 4e84df06203c073_13 fill in the blank 4e84df06203c073_14 fill in the blank 4e84df06203c073_15 Taxes, insurance, etc. (5 years) fill in the blank 4e84df06203c073_16 fill in the blank 4e84df06203c073_17 fill in the blank 4e84df06203c073_18 Selling and admin. expenses (5 years) fill in the blank 4e84df06203c073_19 fill in the blank 4e84df06203c073_20 fill in the blank 4e84df06203c073_21 Profit (Loss) $fill in the blank 4e84df06203c073_22 $fill in the blank 4e84df06203c073_23 $fill in the blank 4e84df06203c073_24 Question Content Area b. Based only on the data presented, should the proposal be accepted? c. Differences in capacity between the two alternatives is to consider before a final decision is made.

oyer Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $63,700, the accumulated depreciation is $25,500, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $132,500. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $201,900 $201,900 Direct materials $68,800 $68,800 Direct labor 47,800 — Power and maintenance 4,500 23,600 Taxes, insurance, etc. 1,600 5,300 Selling and administrative expenses 47,800 47,800 Total expenses $170,500 $145,500 Question Content Area a. Prepare a differential analysis dated May 4 to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)May 4 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues: Sales (5 years) $fill in the blank 4e84df06203c073_1 $fill in the blank 4e84df06203c073_2 $fill in the blank 4e84df06203c073_3 Costs: Purchase price fill in the blank 4e84df06203c073_4 fill in the blank 4e84df06203c073_5 fill in the blank 4e84df06203c073_6 Direct materials (5 years) fill in the blank 4e84df06203c073_7 fill in the blank 4e84df06203c073_8 fill in the blank 4e84df06203c073_9 Direct labor (5 years) fill in the blank 4e84df06203c073_10 fill in the blank 4e84df06203c073_11 fill in the blank 4e84df06203c073_12 Power and maintenance (5 years) fill in the blank 4e84df06203c073_13 fill in the blank 4e84df06203c073_14 fill in the blank 4e84df06203c073_15 Taxes, insurance, etc. (5 years) fill in the blank 4e84df06203c073_16 fill in the blank 4e84df06203c073_17 fill in the blank 4e84df06203c073_18 Selling and admin. expenses (5 years) fill in the blank 4e84df06203c073_19 fill in the blank 4e84df06203c073_20 fill in the blank 4e84df06203c073_21 Profit (Loss) $fill in the blank 4e84df06203c073_22 $fill in the blank 4e84df06203c073_23 $fill in the blank 4e84df06203c073_24 Question Content Area b. Based only on the data presented, should the proposal be accepted? c. Differences in capacity between the two alternatives is to consider before a final decision is made.

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 10E: Differential analysis for machine replacement Boyer Digital Components Company assembles circuit...

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Question Content Area

a. Prepare a differential analysis dated May 4 to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential AnalysisContinue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)May 4

	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Sales (5 years)	$fill in the blank 4e84df06203c073_1	$fill in the blank 4e84df06203c073_2	$fill in the blank 4e84df06203c073_3
Costs:
Purchase price	fill in the blank 4e84df06203c073_4	fill in the blank 4e84df06203c073_5	fill in the blank 4e84df06203c073_6
Direct materials (5 years)	fill in the blank 4e84df06203c073_7	fill in the blank 4e84df06203c073_8	fill in the blank 4e84df06203c073_9
Direct labor (5 years)	fill in the blank 4e84df06203c073_10	fill in the blank 4e84df06203c073_11	fill in the blank 4e84df06203c073_12
Power and maintenance (5 years)	fill in the blank 4e84df06203c073_13	fill in the blank 4e84df06203c073_14	fill in the blank 4e84df06203c073_15
Taxes, insurance, etc. (5 years)	fill in the blank 4e84df06203c073_16	fill in the blank 4e84df06203c073_17	fill in the blank 4e84df06203c073_18
Selling and admin. expenses (5 years)	fill in the blank 4e84df06203c073_19	fill in the blank 4e84df06203c073_20	fill in the blank 4e84df06203c073_21
Profit (Loss)	$fill in the blank 4e84df06203c073_22	$fill in the blank 4e84df06203c073_23	$fill in the blank 4e84df06203c073_24

Question Content Area

b. Based only on the data presented, should the proposal be accepted?

c. Differences in capacity between the two alternatives is

to consider before a final decision is made.

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	Present Operations	Proposed Operations
Sales	$201,900	$201,900
Direct materials	$68,800	$68,800
Direct labor	47,800	—
Power and maintenance	4,500	23,600
Taxes, insurance, etc.	1,600	5,300
Selling and administrative expenses	47,800	47,800
Total expenses	$170,500	$145,500