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

$107,500

Annual depreciation (straight-line)

10,750

Annual manufacturing costs, excluding depreciation

39,600

Annual nonmanufacturing operating expenses

12,800

Annual revenue

95,700

Current estimated selling price of the machine

35,100

New Machine
Cost of machine, six-year life	$135,600
Annual depreciation (straight-line)	22,600
Estimated annual manufacturing costs, exclusive of depreciation	19,000

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 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		$		$		$
Costs
Purchase price
Annual manufacturing costs (6 yrs.)
Income (Loss)		$		$		$