=+Present Proposed Operations Operations Sales $290,000 $290,000 ________ ________ _________ _________ Direct materials $ 86,000 $ 86,000 Direct labor 40,000 —

Power and maintenance 8,000 30,000 Taxes, insurance, etc. 4,000 7,000 Selling and administrative expenses 65,000 65,000 ________ _________ Total expenses $203,000 $188,000 ________ ________ _________ _________

a. Prepare a differential analysis report for the proposal to replace the machine.

Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated.