3. A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $144 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $95 per unit, plus $9 per unit for freight.

a. Prepare a differential analysis dated January 25 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0".

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
January 25
	Make Bottles (Alternative 1)	Buy Bottles (Alternative 2)	Differential Effect (Alternative 2)
Unit costs:
Purchase price	$	$	$
Freight
Variable costs
Fixed factory overhead
Total unit costs	$	$	$

4.A machine with a book value of $246,300 has an estimated six-year life. A proposal is offered to sell the old machine for $216,200 and replace it with a new machine at a cost of $281,200. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,800 to $40,600.

a. Prepare a differential analysis dated April 11 on whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
April 11
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues:
Proceeds from sale of old machine	$	$	$
Costs:
Purchase price
Direct labor (6 years)
Profit (Loss)	$	$	$