A company is considering replacing an old piece of

Reference no: EM13576936

A company is considering replacing an old piece of machinery, which cost $597,500 and has $347,500 of accumulated depreciation to date, with a new machine that costs $483,200. The old machine could be sold for $64,100. The annual variable production costs associated with the old machine are estimated to be $155,700 per year for eight years. The annual variable production costs for the new machine are estimated to be $101,600 per year for eight years.

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Prepare a differential analysis dated October 3, 2014, to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter zero "0".

Differential Analysis

Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)

October 3, 2014

Continue with Old Machine (Alternative 1)

Replace Old Machine (Alternative 2)

Differential Effect on Income (Alternative 2)

Revenues:

Proceeds from sale of old machine

Costs:

Purchase price

Variable productions costs (8 years)

Income (Loss)

Reference no: EM13576936

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