Question Content Area Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000, and its remaining useful life is five years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of five years. Question Content Area Prepare a differential analysis. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential AnalysisContinue with (Alternative 1) or Replace (Alternative 2) Old Machineblank Line Item Description Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Revenues: blank blank blank Proceeds from sale of old machine $Proceeds from sale of old machine $Proceeds from sale of old machine $Proceeds from sale of old machine Costs: Purchase price Purchase price Purchase price Purchase price Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Variable manufacturing costs (5 years) Profit (loss) Question Content Area Should the machine be replaced?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 4E

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Question Content Area

Gull Corp. is considering selling its old popcorn machine and replacing it with a newer one. The old machine has a book value of $5,000, and its remaining useful life is five years. Annual costs are $4,000. A high school is willing to buy it for $2,000. New equipment would cost $18,000 with annual operating costs of $1,500. The new machine has an estimated useful life of five years.

Question Content Area

Prepare a differential analysis. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential AnalysisContinue with (Alternative 1) or Replace (Alternative 2) Old Machineblank

Line Item Description	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:	blank	blank	blank
Proceeds from sale of old machine	$Proceeds from sale of old machine	$Proceeds from sale of old machine	$Proceeds from sale of old machine
Costs:
Purchase price	Purchase price	Purchase price	Purchase price
Variable manufacturing costs (5 years)	Variable manufacturing costs (5 years)	Variable manufacturing costs (5 years)	Variable manufacturing costs (5 years)
Profit (loss)

Question Content Area

Should the machine be replaced?

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