Lone Wolf Technologies Inc. assembles circuit boards by using a manually operated machine to insert electronic components. The original cost of the machine is $82,400, the accumulated depreciation is $33,000, its remaining useful life is five years, and its residual value is zero. A proposal was made to replace the present manufacturing procedure with a fully automatic machine that will cost $155,500. 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 current and proposed operations:

	Current Operations		Proposed Operations
Sales	$261,200		$261,200
Direct materials	$89,000		$89,000
Direct labor	61,800		20,600
Power and maintenance	5,800		9,900
Taxes, insurance, etc.	2,100		6,800
Selling and administrative expenses	61,800		61,800
Total expenses	$220,500		$188,100

Question Content Area

a. Prepare a differential analysis report for the proposal to replace the machine. Include in the analysis both the net differential change in costs anticipated over the five years and the net annual differential change in costs anticipated.

LONE WOLF TECHNOLOGIES Replace Machine Differential Analysis Report

Annual costs and expensespresent machine	$fill in the blank 23a560f17fcdfbf_1
Annual costs and expensesnew machine	fill in the blank 23a560f17fcdfbf_2
Annual differential decrease in costs and expensesAnnual differential increase in costs and expensesAnnual differential decrease in costs and expenses	$Annual differential decrease in costs and expenses
Number of years applicable	fill in the blank 23a560f17fcdfbf_5
Total differential decrease in costs and expensesTotal differential increase in costs and expensesTotal differential decrease in costs and expenses	$Total differential decrease in costs and expenses
Cost of new machine	fill in the blank 23a560f17fcdfbf_8
Net differential decrease in costs and expenses, five-year totalNet differential increase in costs and expenses, five-year totalNet differential decrease in costs and expenses, five-year total	$Net differential decrease in costs and expenses, five-year total
Annual net differential decrease in costs and expensesnew machine	$fill in the blank 23a560f17fcdfbf_11