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Differential Analysis for Machine Replacement Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost
Differential Analysis for Machine Replacement Ridgeway Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $200,000, the accumulated depreciation is $50,000, its remaining useful ife is 6 years, and its residual value is neglig ble. On-October 1 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price or $500,000. The automatic machine has an estimated useful life of 6 years and no significant residual value. For use in evaluating the proposal, the managerial accountant accumulated the following annual data on present and proposed operations: a. Prepare a differential analysis dated October 1 to determine whether to continue with (Atternative 1 ) or replace (Alternative 2 ) the old machine, Prepare the analysis over the useful lfe of the new machine, if an amount is zero, enter "0"- If required, use a minus sign to indicate a loss. Differential Analysis b. Based only on the data presented, should the proposal be accepted? c. Differences in capacty between the two aiternatives is to consider befoen a finat decision is made
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