A commercial oven with a book value of $19,870 has an estimated remaining 5 year life. A proposal is offered to sell the oven for $6,210 and replace it with a new oven costing $35,470. The new machine has a 5-year life with no residual value. The new machine would reduce annual maintenance costs by $6,820.

Provide a differential analysis on the proposal to replace the commercial oven.

Annual maintenance cost reduction

$

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Number of years applicable

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Total differential decrease in cost

$

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Proceeds from sale of equipment

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$

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Cost of new equipment

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Net differential decrease in cost from replacing equipment

$

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