A machine with a book value of $246,800 has an estimated six-year life. A proposal is offered to sell the old machine for $217,700 and replace it with a new machine at a cost of $280,700. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $49,300 to $39,400.

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)	$__________	$__________	$__________

b. Should the company continue with the old machine (Alternative 1) or replace the old machine (Alternative 2)?