A machine with a book value of $$85,500$ has an estimated five$-$year life. A proposal is offered to sell the old machine for $$41,500$ and replace it with a new machine at a cost of $$70,000.$ The new machine has a five$-$year life with no residual value. The new machine would reduce annual direct labor costs from $$10,100$ to $$8,500.$

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

a$.$ Prepare a differential analysis dated June $2$ on whether to continue with the old machine $($Alternative $1)$ or replace the old machine $($Alternative $2).$ If an amount is zero, enter $"0".$ Use a minus sign to indicate costs, losses, or negative differential effect on income.

Differential Analysis

Continue $($Alt$.1)$ or Replace $($Alt$.2)$ Old Machine

June $2$

$\backslash$table$[[$Continue with Old,Replace Old,Differential$],[$Machine$,$Machine,Effects$],[($Alternative $1),($Alternative $2),($Alternative $2)]]$

Revenues:

Proceeds from sale of old machine

$ $$ $ $$ $

Costs:

Purchase price

Direct labor $(5$ years$)$

Profit $($Loss$)$

$\backslash$table$[[,,,],[,,,],[$$$,$$$,,]]$