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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

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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 $65,700, the accumulated depreciation is $26,300, 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 $136,700. The automatic machine has an estimated userulife of five years and no significant residual value. For use in evaluating the proposal, the accountant accumulated the following annual data an present and proposed operations Present Proposed Operations Operations Sales $208,300 $208,300 Direct materials $71,000 573,000 Direct labor 49,300 Power and maintenance 4,600 24,300 Taxes, insurance, etc 1,600 5,500 Selling and administrative expenses 49,300 49,300 Total expenses $175,800 $150,100 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 to Differential Analysis Continue with old Machine (Alt. 1) or Replace Old Machine (Alt. 2) May 4 Continue with Old Machine Replace Old Machine Differential Effect on Income (Alternative 1) (Alternative 2) (Alternative 2) Sales (5 years) Costs Purchase price e.etc 1,600 5,500 Selling and administrative expenses 49,300 49,300 Total expenses $125,800 $150,100 2. 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). Prepa 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 Replace Old Machine Differential Effect on Income Alternative 1) (Alternative 2) (Alternative 2) Sales (5 years) Costs: Purchase price Direct materials (5 years) Direct labor (5 years) Power and maintenance (5 years) Taxes, insurance, etc. (5 years) Selling and admin expenses (5 years) Income (Loss) Mb) duni 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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