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, ten-year life	$109,200
Annual depreciation (straight-line)	10,920
Annual manufacturing costs, excluding depreciation	38,600
Annual nonmanufacturing operating expenses	13,000
Annual revenue	96,000
Current estimated selling price of the machine	35,400
New Machine
Cost of machine, six-year life	$137,400
Annual depreciation (straight-line)	22,900
Estimated annual manufacturing costs, exclusive of depreciation	19,200

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 acquired. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
November 8
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effects (Alternative 2)
Revenues
Proceeds from sale of old machine	$fill in the blank a44807052039ffa_1	$fill in the blank a44807052039ffa_2	$fill in the blank a44807052039ffa_3
Costs
Purchase price	fill in the blank a44807052039ffa_4	fill in the blank a44807052039ffa_5	fill in the blank a44807052039ffa_6
Annual manufacturing costs (6 yrs.)	fill in the blank a44807052039ffa_7	fill in the blank a44807052039ffa_8	fill in the blank a44807052039ffa_9
Profit (loss)	$fill in the blank a44807052039ffa_10	$fill in the blank a44807052039ffa_11	$fill in the blank a44807052039ffa_12