Lexigraphic Printing Company is considering replacing a machine that has been used in its factory for four years. Relevant data associated with the operations of the old machine and the new machine, neither of which has any estimated residual value, are as follows:

Old Machine
Cost of machine, 10-year life	$89,090
Annual depreciation (straight-line)	8,705
Annual manufacturing costs, excluding depreciation	23,780
Annual non-manufacturing operating expenses	6,185
Annual revenue	74,385
Current estimated selling price of machine	29,795

New Machine
Purchase price of machine, six-year life	$119,660
Annual depreciation (straight-line)	19,815
Estimated annual manufacturing costs, excluding depreciation	7,075

Question not attempted.

Differential Analysis

Continue with Old Machine (Alternative 1) or Replace Old Machine (Alternative 2)

April 30

1		Continue with Old Machine	Replace Old Machine	Differential Effect on Income
2		(Alternative 1)	(Alternative 2)	(Alternative 2)
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