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Franklin Printing Company is considering replacing a machine that has been used in its factory for 4 years. Relevant data associated with the operations
Franklin Printing Company is considering replacing a machine that has been used in its factory for 4 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 $108,800 Annual depreciation (straight-line) 10,880 Annual manufacturing costs, excluding depreciation 39,200 Annual nonmanufacturing operating expenses Annual revenue 12,800 94,600 Current estimated selling price of the machine 35,800 New Machine Cost of machine, 6-year life Annual depreciation (straight-line) $139,200 Estimated annual manufacturing costs, exclusive of depreciation 23,200 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 to determine whether to Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2). The analysis should indicate the differential profit that would result over the 6-year period if the new machine is acquired. If an amount is zero, enter zero "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) November 8
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