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Differential Analysis Report for Machine Replacement Proposal Franklin Printing Company is considering replacing a machine that has been used in its factory for four years.
Differential Analysis Report 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 $108,500 Annual depreciation (straight-line) 10,850 Annual manufacturing costs, excluding depreciation 38,300 Annual nonmanufacturing operating expenses 13,300 Annual revenue 95,400 Current estimated selling price of the machine 36,700 New Machine Cost of machine, six-year life $139,200 Annual depreciation (straight-line) 23,200 Annual manufacturing costs, excluding depreciation 18,400 Annual nonmanufacturing operating expenses 10,000 Annual nonmanufacturing operating expenses and revenue are not expected to be affected by the purchase of the new machine. 1. Prepare a differential analysis report comparing operations utilizing the new machine with operations using the old machine. The analysis should indicate the differential income that would result over the six-year period if the new machine is acquired. Franklin Printing Company Proposal to Replace Machine Differential Analysis Report Annual manufacturing costs associated with old machine Annual manufacturing costs associated with new machine Annual reduction in manufacturing costs $ Number of years applicable Cost reduction attributable to difference in manufacturing costs Proceeds from sale of old machine Cost of new machine Net income anticipated from replacement, six-year total
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