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Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $598,200 and has $348,400 of accumulated depreciation to date,
Machine Replacement Decision A company is considering replacing an old piece of machinery, which cost $598,200 and has $348,400 of accumulated depreciation to date, with a new machine that has a purchase price of $484,500. The old machine could be sold for $61,400. The annual variable production costs associated with the old machine are estimated to be $155,200 per year for eight years. The annual variable production costs for the new machine are estimated to be $98,500 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) < Revenues: Proceeds from sale of old machine Costs: Purchase price Variable productions costs (8 years) Profit (Loss) May 29 Continue with Old Machine Replace Old Machine Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) 1000 0 100
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