A machine with a book value of $248,900 has an estimated six-year life. A proposal is offered to sell the old machine for $214,400 and replace it with a new machine at a cost of $282,400. The new machine has a six-year life with no residual value. The new machine would reduce annual direct labor costs from $50,300 to $40,200.

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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 3

	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues:
Proceeds from sale of old machine	$fill in the blank	$fill in the blank	$fill in the blank
Costs:
Purchase price	fill in the blank	fill in the blank	fill in the blank
Direct labor (6 years)	fill in the blank	fill in the blank	fill in the blank
Income (Loss)	$fill in the blank	$fill in the blank	$fill in the blank

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

Continue with the old machine or Replace the old machine??