Replace Equipment A machine with a book value of $62,400 has an estimated 5-year life. A proposal is offered to sell the old machine for $39,400 and replace it with a new machine at a cost of $58,500. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $8,700 to $5,900. Prepare a differential analysis dated April 11 on whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue with Replace Old Differential Old Machine Machine Effect (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine $ $ $ Costs: Purchase price Direct labor (5 years) Profit (loss) $ $ $ Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?
Replace Equipment A machine with a book value of $62,400 has an estimated 5-year life. A proposal is offered to sell the old machine for $39,400 and replace it with a new machine at a cost of $58,500. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $8,700 to $5,900. Prepare a differential analysis dated April 11 on whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 11 Continue with Replace Old Differential Old Machine Machine Effect (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine $ $ $ Costs: Purchase price Direct labor (5 years) Profit (loss) $ $ $ Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?
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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Replace Equipment
A machine with a book value of $62,400 has an estimated 5-year life. A proposal is offered to sell the old machine for $39,400 and replace it with a new machine at a cost of $58,500. The new machine has a 5-year life with no residual value. The new machine would reduce annual direct labor costs from $8,700 to $5,900.
Prepare a differential analysis dated April 11 on whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.
| Differential Analysis |
| Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) |
| April 11 |
| Continue with | Replace Old | Differential | |
| Old Machine | Machine | Effect | |
| (Alternative 1) | (Alternative 2) | (Alternative 2) |
| Revenues: | |||
| Proceeds from sale of old machine | $ | $ | $ |
| Costs: | |||
| Purchase price | |||
| Direct labor (5 years) | |||
| $ | $ | $ |
Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?
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