Quebec Printing Company is considering replacing a machine that has been used in its factory for four 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:

Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

Instructions
1. Prepare a differential analysis report as of October 13, 2008, comparing operations utilizing the new machine with operations using the present equipment. The analysis should indicate the total differential income that would result over the 6-year period if the new machine is acquired.
2. List other factors that should be considered before a final decision isreached.

Transcribed Image Text:

Old Machine Cost of machine, 10-year life Annual depreciation (straight-line) Annual manufacturing costs, excluding depreciation Annual nonmanufacturing operating expenses Annual revenue Current estimated selling price of machine 5360,000 36,000 325,000 215,000 740,000 210,000 New Machine Cost of machine, 6-year life Annual depreciation (straight-line) Estimated annual manufacturing costs, exclusive of depreciation $410,000 68,333 284,000