Keep or Replace Machine:

Skiles Corporation 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 $443,600

Current accumulated depreciation 332,100

Estimated annual variable manufacturing costs for machine 72,950

Estimated selling price of machine 159,400

Estimated remaining useful life (in years) 6

New Machine:

Purchase cost $791,300

Estimated annual variable manufacturing costs for machine 51,100

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 $____________