AB-Care paid $59,826 for an x-ray machine 4 years ago. The equipment was expected to have a useful life of 12 years from the date of acquisition with no residual value. The annual operating costs, without depreciation, are $35,896.

An improved x-ray device incorporating the new technology is available at a purchase cost of $69,826. In terms of revenue, both teams would generate the same total revenue. However, this new equipment will reduce annual operating costs, without depreciation, to $23,930. The useful life of the new equipment was estimated at 8 years with no residual value. It is estimated that the old equipment will have to be confiscated because it would be difficult to find a buyer for it.

AB-Care's accountant performed the following differential analysis related to the replacement of the X-ray machine. After reviewing this analysis, the company manager performed his own differential analysis and determined to accept the proposal to acquire the new equipment based on that it would generate savings.

Savings in operational expenses	95722
Less: loss due to undepreciated cost of obsolete equipment	39884
Less: Cost of acquiring new equipment	69826
Loss if equipment is replaced	-13988

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