Flint tooling company is considering replacing a machine

Reference no: EM13611867

Flint Tooling Company is considering replacing a machine that has been used in its factory for two years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, eight-year life $48,000 Annual depreciation (straight-line) 6,000 Annual manufacturing costs, excluding depreciation 14,500 Annual nonmanufacturing operating expenses 2,900 Annual revenue 29,600 Current estimated selling price of the machine 18,000 New Machine Cost of machine, six-year life $58,500 Annual depreciation (straight-line) 9,750 Estimated annual manufacturing costs, 5,200 exclusive of depreciation Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

1. Prepare a differential analysis report as of May 22, 2010, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired.

2. List other factors that should be considered before a final decision is reached.

Reference no: EM13611867

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