1

2

3

Replace Equipment A machine with a book value of $251,600 has an estimated six-year life. A proposal is offered to sell the old machine for $216,500 and replace it with a new machine at a cost of $283,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,200 to $40,200. Prepare a differential analysis dated October 3 on whether to continue with the old machine (Alternative 1) or replace the 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) October Continue with Replace Old Differential Effect Old Machine Machine on Income (Alternative 1) (Alternative 2) (Alternative 2) Revenues Proceeds from sale of old machine 0 216,500 $216,500 Costs Purchase price 20.700 1283.700 Direct labor (6 years) -401,600 401.600 X 388 800 X 5 12.300 X Income (Low) Process or Sell Product A is produced for $3.58 per pound. Product A can be sold without additional processing for $4.22 per pound or processed further into Product B at an additional cost of $0.38 per pound. Product can be sold for $4.44 per pound. Prepare a differential analysis dated November 15 on whether to sell A (Alternative 1) or process further into B (Alternative 2). If required, round your answers to the nearest whole dollar. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Sell Product A (Alt. 1) or Process Further into Product B (Alt. 2) November 15 Process Further Differential Effect Sell Product A into Product on Income (Alternative 1) 3 (Alternative 2) (Alternative 2) Revenues, per unit Costs, per unit Income (Loss), per unit Should Product A be sold (Alternative 1) or processed further into Product B (Alternative 2)? Accept Business at Special Price Product D is normally sold for $49 per unit. A special price of $33 is offered for the export market. The variable production cost is $26 per unit. An additional export tariff of 12% of revenue must be paid for all export products. Assume that there is sufficient capacity for the special order. Prepare a differential analysis dated March 16, on whether to reject (Alternative 1) or accept (Alternative 2) the special order. If required, round your answers to two decimal places. 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 Reject Order (Alt. 1) or Accept Order (Alt. 2) March 16 Reject Order Accept Order (Alternative 1) (Alternative 2) Differential Effect on Income (Alternative 2) Revenues, per unit Costs: Variable manufacturing costs, per unit Export tariff, per unit Income (Loss), per unit Should the special order be rejected (Alternative 1) or accepted (Alternative 2)