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Aa Aa E 4. Differential analysis: Replacing equipment Trenton Manufacturing has been using a particular machine for over 10 years and believes that it may
Aa Aa E 4. Differential analysis: Replacing equipment Trenton Manufacturing has been using a particular machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a wise economic decision. The company's controller pulled together the following information on the old machine and the new machine: Old Machine $667,000 original cost 503,000 Current accumulated depreciation Estimated annual variable manufacturing costs for machine 56,000 147,000 Estimated selling price of machine Estimated remaining useful life (in years) New Machine $289,100 Purchase cost 27,000 Estimated annual variable manufacturing costs for machine Estimated residual value Estimated useful life (in years) Fill in the following differential analysis to help Trenton's controller decide whether to propose that the company continue with the old machine (alternative 1) or replace it with the new machine (alternative 2). Note: This problem contains check figures (V) Differential Analysis Continue with old Machine (Alternative 1) or Replace oid Machine (Alternative 2) Continue with Replace Old Differential Effect on Income Old Machine Machine (Alternative 1) (Alternative 2) (Alternative 2) Revenues: Proceeds from sale of old machine Costs: Purchase price Annual variable costs (7 years) (V) Total costs Income (loss)
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