Question
Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is
Kim Kwon Digital Components Company assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $92,800, the accumulated depreciation is $37,100, its remaining useful life is five years, and its residual value is negligible. On May 4 of the current year, a proposal was made to replace the present manufacturing procedure with a fully automatic machine that has a purchase price of $193,000. The automatic machine has an estimated useful life of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data on present and proposed operations: Present Operations Proposed Operations Sales $294,200 $294,200 Direct materials $100,200 $100,200 Direct labor 69,600 Power and maintenance 6,500 34,300 Taxes, insurance, etc. 2,300 7,700 Selling and administrative expenses 69,600 69,600 Total expenses $248,200 $211,800 Question Content Area a. Prepare a differential analysis dated May 4, to determine whether to continue with the old machine (Alternative 1) or replace the old machine (Alternative 2). Prepare the analysis over the useful life of the new machine. If an amount is zero, enter "0". Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 4 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Sales (5 years) $fill in the blank 9e1163f8004506f_1 $fill in the blank 9e1163f8004506f_2 $fill in the blank 9e1163f8004506f_3 Costs: Purchase price fill in the blank 9e1163f8004506f_4 fill in the blank 9e1163f8004506f_5 fill in the blank 9e1163f8004506f_6 Direct materials (5 years) fill in the blank 9e1163f8004506f_7 fill in the blank 9e1163f8004506f_8 fill in the blank 9e1163f8004506f_9 Direct labor (5 years) fill in the blank 9e1163f8004506f_10 fill in the blank 9e1163f8004506f_11 fill in the blank 9e1163f8004506f_12 Power and maintenance (5 years) fill in the blank 9e1163f8004506f_13 fill in the blank 9e1163f8004506f_14 fill in the blank 9e1163f8004506f_15 Taxes, insurance, etc. (5 years) fill in the blank 9e1163f8004506f_16 fill in the blank 9e1163f8004506f_17 fill in the blank 9e1163f8004506f_18 Selling and admin. expenses (5 years) fill in the blank 9e1163f8004506f_19 fill in the blank 9e1163f8004506f_20 fill in the blank 9e1163f8004506f_21 Income (Loss) $fill in the blank 9e1163f8004506f_22 $fill in the blank 9e1163f8004506f_23 $fill in the blank 9e1163f8004506f_24 Question Content Area b. Based only on the data presented, should the proposal be accepted? c. Differences in capacity between the two alternatives is to consider before a final decision is made.
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