Keep or Replace Machine:

Skiles Coporation is a manufacturer of classic rocking chairs. The company has been using a particular sanding and finishing machine for over 10 years and believes that it may be time to replace the machine. The company is trying to decide whether replacing the old machine is a wise economic decision. The company's controller pulled together the following information on the old machine and the new possible replacement machine.

Old Machine:
Original cost	$454,300
Current accumulated depreciation	319,700
Estimated annual variable manufacturing costs for machine	74,200
Estimated selling price of machine	197,100
Estimated remaining useful life (in years)	6
New Machine:
Purchase cost	$805,000
Estimated annual variable manufacturing costs for machine	52,650
Estimated residual value	0
Estimated useful life (in years)	6

Replace or Keep Decision- Differential Analysis Report

Cost of replacing old machine:

Annual differential decrease in cost $

x number of years

Total differential decrease in cost

Proceeds from sale of present machine

Cost of new machine

Net differential (increase)/decrease in cost, six year total $