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	$436,600
Current accumulated depreciation	322,400
Estimated annual variable manufacturing costs for machine	72,200
Estimated selling price of machine	190,300
Estimated remaining useful life (in years)	6
New Machine:
Purchase cost	$814,400
Estimated annual variable manufacturing costs for machine	47,350
Estimated residual value	0
Estimated useful life (in years)	6

Select the relevant or irrelevant information below:

Annual variable costs of old machine	Relevant
Selling price of old machine	Relevant
Matching lives	Relevant
Purchase price of new machine	Relevant
Accumulated depreciation of old machine	Irrelevant

Fill in the differential analysis.

Replace or Keep Decision Differential Analysis Report
Cost of replacing old machine:
Annual differential decrease in cost	$24,850
x number of years	6
Total differential decrease in cost	149,100
Proceeds from sale of present machine	190,300	?
Cost of new machine		-814,400
Net differential (increase)/decrease in cost, six year total		?