Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $597,500 and has $350,900 of accumulated depreciation to date, with a new machine that has a purchase price of $486,300. The old machine could be sold for $64,200. The annual variable production costs associated with the old machine are estimated to be $157,300 per year for eight years. The annual variable production costs for the new machine are estimated to be $100,100 per year for eight years.

a.1 Prepare a differential analysis dated May 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss.

Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2 ) the old machine