Machine Replacement Decision

A company is considering replacing an old piece of machinery, which cost $$600,500$ and has $$350,700$ of accumulated depreciation to date, with a new machine that has a purchase price of $$485,600.$ The old machine could be sold for $$64,500.$ The annual variable production costs associated with the old machine are estimated to be $$157,600$ per year for $8$ years. The annual variable production costs for the new machine are estimated to be $$100,200$ per year for $8$ years.

a$.1$ Prepare a differential analysis dated December $10$ 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 $($Alt$.1)$ or Replace $($Alt$.2)$ Old Machine

December $10$

$\backslash$table$[[$December $10],[$Line Item Description,$\backslash$table$[[$Continue with$],[$Old Machine$],[($Alternative $1)]],\backslash$table$[[$Replace Old Machine$],[($Alternative $2)]],\backslash$table$[[$Differential Effects$],[($Alternative $2)]]],[$Revenues:$],[$Proceeds from sale of old machine,$$,$$$,],[$Costs:$],[$Purchase price$],[$Variable productions costs $(8$ years$)],[$Profit $($loss$),,$$$,$$