Question
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
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 | $434,600 |
Current accumulated depreciation | 313,700 |
Estimated annual variable manufacturing costs for machine | 72,550 |
Estimated selling price of machine | 184,100 |
Estimated remaining useful life (in years) | 6 |
New Machine: | |
Purchase cost | $788,000 |
Estimated annual variable manufacturing costs for machine | 45,650 |
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: | N/A | N/A |
Annual differential decrease in cost | $ ????? | N/A |
x number of years | 6 | N/A |
Total differential decrease in cost | ????? | N/A |
Proceeds from sale of present machine | 184100 | $????? |
Cost of new machine | N/A | 788000 |
Net differential (increase)/decrease in cost, six year total | N/A | $???? |
Just need help with the ones with question marks. The N/A means nothing is required or available to put an answer.
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