Differential Analysis for Machine Replacement Proposal Franklin Printing 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, 10-year life $109,200 Annual depreciation (straight-line) 10,920 Annual manufacturing costs, excluding depreciation 37,700 Annual nonmanufacturing operating expenses 13,100 Annual revenue 94,200 Current estimated selling price of the machine 36,300 New Machine Cost of machine, six-year life $136,800 Annual depreciation (straight-line) 22,800 Estimated annual manufacturing costs, exclusive of depreciation 17,900 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by purchase of the new machine.

1. Prepare a differential analysis as of February 28, 2014, comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. If an amount is zero, enter zero "0".

Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
February 28, 2014
		Continue with Old Machine (Alternative 1)		Replace Old Machine (Alternative 2)		Differential Effect on Income (Alternative 2)
Revenues
Proceeds from sale of old machine		$ Correct 9 of Item 1		$ Correct 10 of Item 1		$ Correct 11 of Item 1
Costs
Purchase price		Correct 14 of Item 1		Correct 15 of Item 1		Correct 16 of Item 1
Annual manufacturing costs (6 yrs.)		Correct 18 of Item 1		Correct 19 of Item 1		Correct 20 of Item 1
Income (Loss)		$ Correct 22 of Item 1		$ Correct 23 of Item 1		$