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A machine with a book value of $126,000 has an estimated six-year life. A proposal is offered to sell the old machine for $98,000 and
A machine with a book value of $126,000 has an estimated six-year life. A proposal is offered to sell the old machine for $98,000 and replace it with a new machine at a cost of $155,000. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $68,000 to $58,000.
Note: Consider an outflow a negative value; an inflow a positive value. If an amount is zero, enter "0"
th the old machine (Alternative 1) or replace the old machine (Alternative 2 Prepare a differential analysis dated February 18, 2014, on whether to continue wi Differential Analysis Continue with old Machine (Alt. 1)orReplace told Machine (Alt 2) February 18, 2014 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Revenues Proceeds from sale of old machine 98,000 98,000 Costs: Purchase price 126,000 155,000 -29,000 Direct labor (6 years) -408,000 60,000 s s -405,000 s Income (Loss) 129,000Step by Step Solution
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