Differential Analysis

A commercial oven with a book value of $34,500 has an estimated remaining 5 year life. A proposal is offered to sell the oven for $10,780 and replace it with a new oven costing $61,630. The new machine has a 5-year life with no residual value. The new machine would reduce annual maintenance costs by $11,850. Provide a differential analysis on the proposal to replace the commercial oven. Annual maintenance cost reduction $ Number of years applicable Total differential decrease in cost Proceeds from sale of equipment Cost of new equipment Net differential decrease in cost from replacing equipment U