Question
Differential Analysis for Machine Replacement Proposal Flint Tooling Company is considering replacing a machine that has been used in its factory for four years.
Differential Analysis for Machine Replacement Proposal Flint Tooling Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows: Old Machine Cost of machine, ten-year life $106,900 Annual depreciation (straight-line). 10,690 Annual manufacturing costs, excluding depreciation 39,300 Annual nonmanufacturing operating expenses Annual revenue 13,300 96,000 Current estimated selling price of the machine 36,900 New Machine Cost of machine, six-year life Annual depreciation (straight-line) $137,400 Estimated annual manufacturing costs, exclusive of depreciation 22,900 17,300 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine. Required: 1. Prepare a differential analysis as of November 8 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the differential profit that would result over the six-year period if the new machine is
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