Question
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
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 $88,825 Annual depreciation (straight-line) 8,700 Annual manufacturing costs, excluding depreciation 23,710 Annual non-manufacturing operating expenses 5,955 Annual revenue 74,035 Current estimated selling
Prepare a differential analysis as of April 30 comparing operations using the present machine (Alternative 1) with operations using the new machine (Alternative 2). The analysis should indicate the total differential income that would result over the six-year period if the new machine is acquired. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. If there is no amount or an amount is zero, enter "0". A colon (:) will automatically appear if required.
List other factors that should be considered before a final decision is reached. Check all that apply.
Should management have purchased a different model of the old machine?
What opportunities are available for the use of the $90,005 of funds ($119,840 less $29,835 proceeds from the old machine) that are required to purchase the new machine?
What effect does the federal income tax have on the decision?
Was the purchase price of the old machine too high?
Are there any improvements in the quality of work turned out by the new machine?
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